OK so if we respond to the return request by choosing the option that we will accept the return and refund the buyer upon receipt then is it us who has to negotiate with the buyer about the return postage details (which it says in the message by the way) or do paypal instruct the buyer to return the item with tracking after we respond.

I hope its the latter rather than us.

Seems to me that paypal are kind of on the sideline at the moment as this request is raised with ebay not paypal.