Does she have grounds to request the money be direct deposited? 

No, and explain to her the ebay system doesn't allow you to refund in another way as you won't be covered.

If you DD and she then opens a PayPal case, she could in effect be refunded twice.

To follow ebays procedure, you will be refunding her as soon as you receive the item and the refund will automatically go back to it's funding source when you select refund in PayPal. (Don't deviate, she may be pushing for the refund knowing it hasn't been posted).

It's also possible the dress was worn for the one occasion it was needed and now being returned.

If you find it to have been used, and if she opens a case with PayPal and she cannot prove postage she will lose the case.

Be professional and polite in all communication through ebay, so if it does turn sour you may have grounds for feedback removal.