Just thought I'd wrap up this little story since so many of you (kindly) added advice, outrage, and support for the situation originally:
First, let me say there is no way I was going to refund AND let them keep the set. Enabling poor behavior is not something I do.
After the quoted events took place, I waited a few days with no response, then noticed negative feedback had been left, referencing how tiny the set was and that the price paid was straight-up robbery.
So I sent one last kind message, saying if they wanted to work together toward resolution, I was still game - but would appreciate knowing either way so that I could move forward.
Naturally, no reply.
So I left a response to the feedback pointing out the buyer admitted not paying attention to the listing prior to purchase, and did not respond to my offer of a refund. Then I reported them for feedback abuse (yeah I know, not strictly in the guidelines, but I believe in "using the system" fairly, not just "doing as I'm told".
A day or so later, I get a message from them stating "My little boy came home asking for it. That reminded me to send you a msg. Moments before you responded, he opened it, after making a remark himself about the size of it."
Yeah, sure.
So I waited another week or so, dealing with some of life's other little misfortunes and wondering if somehow, magically, something would happen due to my filing a report. Nope.
Called eBay customer service last Friday to address the situation. The clown I first talked to only wanted to emphasize policy and try to convince me that the negative feedback was the buyer's honest opinion about their experience, and they would therefore not remove it because it was valid. I argued that the remarks had nothing to do with my part in the transaction, they were experiencing buyer's remorse, and having admitted to not paying attention, there was no way I should suffer as a result. He countered that I did my part in responding to the feedback, so others could read my side of it. I explained that many people do not read feedback, but some do care about seeing that "100%", which I had unjustly lost. The conversation was going nowhere, so I asked for a supervisor.
It took a while, and they apparently had quite a discussion because the supervisor greeted me tentatively and asked me to verify his summary of the situation, which was basically accurate. I told him that the negative feedback was basically a form of defamation (referencing "robbery") and that, given the fact that I shared over 10% of my $ales with eBay, I didn't understand why they failed to seriously consider giving a little back in the form of protection from ridiculous things like this. Then I asked what exactly I was supposed to do different.
He looked at everything and mentioned being a busy seller in the past as well, "feeling my pain" more or less... then said because I did offer a refund and basically did all I could do to work with the buyer, they would consider making an exception to the policy and perhaps remove the negative feedback. He said I would get an email within 24 hours explaining the final decision, either way. I thanked him sincerely for listening and taking the situation seriously.
This afternoon, after hearing nothing since that call, I contacted eBay CS once again, was sent to the "escalation" department, and was asked by someone new, of course, to explain everything again. I mentioned I had already done so twice and was waiting to hear from a supervisor, I hoped there would be notes or something for reference... which, after looking into, he said he thought he had an idea about but it would really help for me to explain it all again. I happened to be volunteering in my son's school library and had to put him off about 30 seconds to check out a couple books, and he took it upon himself to put me on hold (with warning) and research it all himself.
After a few minutes, he came back and explained in agonizing detail that he was removing the negative feedback for the reasons the supervisor basically mentioned previously.
Then I got a couple recent "item not received" defects removed as well, which were due to lag in tracking updates by USPS and had, once again, NOTHING to do with my performance as a seller.
He did state that it was much better to call CS when the latter situation happens and a valid tracking number is uploaded so that they can close the case manually and it never shows up as a defect, rather than wait and let the buyer close the case. I found that quite helpful.
Yet again, the moral of the story is be patient and persistent and don't give in to stupidity, when you feel the battle is worth fighting.