YES. But you have to stay within national boundaries and play it safe, US -> US. CA -> CA. I wouldnt play it International because it can bring in unknowns about a foreign countries postal service and they rarely relay information to the US's postal system although some do. There is a couple ways to secure paypal funds to your account and your correct, through physical delivery of goods. you must know the postal services options. Its pretty much like court. You have to have physical evidence proving item was delivered although since paypal is online/electronic they want electronic proof of delivery. This can be done through USPS Signature Confirmation which provides an online picture of the receivers signature  although many years of selling on ebay and using paypal I have found this NOT always true and sometimes a person can receive with a signature confirmation track able item and NOT give a signature. BTW: If you paid for signature service and its not provided YOU ARE entitled to a refund.
I dont always say this but getting on the phone with paypal always give you the upper hand for anything. Dont let them tell you otherwise. ALL customer service reps can directly access your account and + or - funds in a snap. you can convince them to do just about anything to help your cause. I've had to do this a time when a scumbag tries to scam me on ebay. Be nice and they will do anything for you!
Although if your dealing with a stolen account that would bring up a problem, I havent dont much research there but ebay has a program where they eat it when someone gets scammed under certain circumstances