In the paypal claim dispute it gives me a option to tick a box with partial payment of $100 along with other options eg. pay full refund and dispute his claim. Im guessing paypal has agreed to close his dispute if I pay him the $100. Thanks everyone for all your advise ...

If you fight the dispute, the $100 refund option will (as far as I know) be off the table, and PayPal will then decide the outcome of the case. They don't (generally) automatically instruct the buyer to return for a refund, instead requiring evidence from both sides before making a decision. There are no guarantees that the buyer will even win, it's only if the claim is decided in their favour that they will be requested to return the camera, then they actually have to return it (registered or equivalent) to get the refund. 

There is one other good reason for sellers to fight claims like this - if you don't, you're out $100 or more from (possible) fraud, if you fight and lose, same scenario, but if you win, not only do they not get away with it, but any seller who wins a PayPal claim is automatically granted seller protection, which means if they paid with a credit card and go on to try and make a claim via the card provider, even if they are successful the funds won't be taken from the seller and you won't be subject to the $15 extra fee.