Good god man, you're still going on about BitPay?
Not me man, it is BFL trying to pass their troubles to BitPay!
Here's a quick little step-by-step on how payments for products (in this case, products from Butterfly Labs) works:
1. Customer [with Bitcoins] is on the website.
2. They select a BFL product they'd like to purchase, choosing payment in Bitcoins.
3, Invoice is generated and a third party payment processor (BitPay) takes over at checkout.
4. Bitcoins are sent to the BitPay address as listed on the invoice.
5. BitPay recognizes the payment and converts all of those coins to a fiat (in this case, USD) at whatever the current market rate is.
6. BitPay shows that you've paid your invoice and redirects you back to the previous website.
7. BitPay sends the payment (in fiat) to Butterfly Labs (and takes their cut).
8. BFL shows you've paid and are processing your order.
So, explain to me again why BFL should pay out Bitcoins during a refund?
Here's a quick little one-step answer:
1. BFL instruct customer to pay in bitcoin, they get bitcoin, and issue commercial invoice priced in bitcoin.