If it was a pick up item, there is no PayPal buyer or seller protection as buyer normally inspects, and if happy, pays, then takes it home. 

I am just a little surprised he wants to take that avenue so soon. I thought you guys were talking and maybe you did too.

Probably as PJ suggested, easier to take back, refund and offer to underbidder or re-list. It will probably sell quite easily. Rather than trying to prove the string theory, (which is most likely the prob) buyer seems to have a bee in his bonnet now.

Being nice and easy for the refund, you might only get a neut, besides replying to feedback with Have Refunded, always shows you are prepared to solve issues.