Yea, F that. If he was a guest user I would simply cancel the sale and re-list. Bunch of BS that Ebay lets you get scammed...plus they charge you the fees for being scammed as well.
I would think eBay will credit back the fees if he gives them a call to explain the situation. He should not be charged back $1,600 from PayPal because they were the one's who basically says the buyer is okay.
Bottom line: Don't sell to anyone with less than 10 positive feedbacks as a buyer for a large amount of money. They should have an approved PayPal account with confirmed address by that time.
I've heard similar stories like that before. IIRC OgNasty was scammed similarly when selling a few miners on eBay. They were worth less than $1600 but he was still out of the money and the miners.
I think the real bottom line is to not sell on eBay period.. I've heard way too many stories about legit sellers being ripped off by fraudulent buyers for my liking.