I personally would not cancel the dispute.

No way.

For a couple of reasons.

1. From what others have said on here (not my personal knowledge or experience) I gather that if you simply ask someone to cancel a transaction and they don't bother to respond, you are left with all the selling fees to pay, they are not refunded back to you.

2. If you withdrew a dispute, I am not sure you could open a second one if you needed to.

These people have given you the complete run around. I believe they have lied to you all along because they are not trying to pay now, they are trying to cancel out.

 Let the dispute stand. After a few days (4 I think), make a claim.

That way they get a strike, you get selling fees refunded.

Apart from anything else, I think you owe it to the ebay community to give this buyer a strike. What they have done to you is wrong and if they do it to someone else and get another strike, at least they will be on some blocked lists and feel some consequences.

DO NOT cancel your dispute!!

If they don't pay for the goods, they can't give you negative feedback (you will be able to have it removed if they try)