Escalate it yourself.  She will have to end up returning the item - cases that I have had where they are escalated, paypal stipulates the item has to be sent back to you.  The buyer also has to give proof to paypal that it has been sent back (tracking number)

Your account is in negative because as soon as someone opens a dispute, paypal put a hold on the amount, until the dispute is resolved.

Don't be scares of escalating this - if it is as bad as she claims it is, then she will have no problem returning the item

Some people are just plain dodgy - sounds like this lady is

Good luck