They clearly are very out of touch with Australia Post prices and services, and weighing under 250g means nothing when an item has to go as a parcel (i.e. 5 grams costs as much as 500 grams to post, and even if we're talking a letter here, it still doesn't mean P&H can be halved just cos the buyer says so.... ).

Secondly, even if you could have halved the cost of postage, that means they were only offering $5.85 for the $10 item, or asking for a 41.5% discount. 

So, no, I don't think you were being unreasonable at all. Personally I'd rather an item went unsold than to sell it for a pittance (or lose money), especially to someone who I feel is being rude.

When I first started selling on eBay, I listed mostly collectibles as auctions and would often get messages asking me if I had a 'Buy It Now' price. Standard answer was always 'No, I'll be letting the auction run its course". Members often though they could tempt the seller with a guaranteed sale price and get an item for less than it would sell for at auction this way, and I can only say I never once regretted my decision to decline these offers, no matter the outcome of the auction.