Update.

• I did some reading and digging, it seems if I open dispute, and buyer did pay then blame me for other issue after sending them the item. I'm actually at more of a financial lose as it seems eBay do favour Buyer as per this experience so far.
• I found another link/pathway to cancel the transaction with "Buyer requested" and eBay representative told me I could do so that way.
• I did it, but I noticed the negative feedback remains. (Maybe I shouldn't have done it in retrospect, but eh~ learnt something)
• eBay Chat representative did balk and brick-walled me by saying they do not have the power to remove feedback even though the feedback removal system tells me "Due to technical issue, please contact Customer Service". I did quote the policy and again, I got the same response/brick wall.

The lesson so far.

• eBay DOES NOT adhere to their own policy
• DO NOT ENGAGE BUYER if they do not pay. Simply let transaction fall to 4 days then open Unpaid Item Case. Buyer has all the power here. You cannot leave feedback but they can, whether they've paid or not
• If they do leave negative feedback. It is up to you to take the risk of Unpaid Item Case, again, it's a lose-lose for seller here

I've opened a ticket on ACCC for eBay Australia regarding this. Will update on where it goes.

BBB seen to be dead for US. I was planning to do one for eBay US too.

It's been fun so far. I'll see where it goes afterwards to see how low Sellers actually are in the foodchain. 🙂