This often happens with sellers who are inexperienced, specially those who put up an auction listing with a Buy It Now price and dont realise that it will disappear when the first bid is placed. They think the Buy It Now is a reserve which it's not. (this may or may not be applicable in your instance).
If they refuse to sell there is nothing you can do to get the item, but consider your words carefully when you leave appropriate feedback (which in this case could be a neg. along with the comment "seller refused to complete transaction").
When leaving feedback, mark the DSR stars down accordingly as you think appropriate. Leaving no stars wont impact on the seller so make sure you leave at least 1 star in each area you are not happy with.
You can try reporting them for seller non-performance but there have been posts stating eBay no longer acts on these reports:
If you get payment reminders ignore them, they are automated. If the seller opens a dispute against you (unlikely) they can be reported as it's a violation of policy for a non-performing seller to open a dispute for non-payment. http://pages.ebay.com.au/help/policies/fvf-abuse.html
You should also refuse any alert sent to you to agree to a mutual cancellation.
