I have a Bitpay merchant account, I know how it works.
I have too. This is why I'm surprised to read that you don't undestand what is the difference between paying by bitcoins and paying by PayPal/credit card.
I don't own any $US, it's not my local currency, for me to pay BFL I would have to convert to $US generally using PayPal, and if I wanted a refund I would expect to have to convert back from $US to my local currency regardless of what happened to the exchange rate in the meantime. If my local currency was BTC I would expect the conversion to use the spot exchange rate, not some past exchange rate.
Didn't I already mentioned 2 times that to pay using PayPal you have to be PayPal customer? This is not the case with BitPay, because BFL customers are not BitPay customers!
If I pay USD priced product via a credit card run in GBP my bank is doing the currency conversion for me and sending USD to the merchant. My bank has a contract signed with me and is licensed to do such currency conversions. The transactional currency is USD and merchant never has control on my GBP. They don't even see how much GBP I have paid. Respectively the invoice is issued in USD. If there is a refund request USD are converted in GBP AGAIN by MY BANK because this is my bank I have authorized to do so! How can BFL claim they refund USD if they don't even know what is the USD bank account of their customer?