The problem part is that it was not done through Ebay, and not with Paypal. That is where the probelm of fraud comes in.
The way to handle this deal was to have the seller send you a private offer through Ebay, much like a second chance offer. That way it is still through Ebay, and done with Paypal. Then there is a little recourse. You have to remember that Ebay is paid by the seller, not the buyer, so that is where their loyalty lies, even when done through Ebay. The seller is innocent until you have throat grabbing proof of guilt.
USPS (Post Office) - their "Delivery Confirmation", Tracking numkbers, etc, etc, just mean that someone at the post office marked the paperwork to "say" that it was delivered. Since the recipient doesn't sign for the package, there is no proof that the package was any where near the delivery address. It could have been left at any address, anywhere at the right address, or taken home by an employee. All the paperwork proves it that someone marked off the paperwork. To get anytjhing more, you need to send it certified with a return receipt and signature required by addressee. That costs a lot more.