Ok, so my understanding is that Multi-sig escrow can effectively provide the ability for a 'chargeback' in the case of a 2 of 3 wallet with one party being say, a Coinbase as the arbitrator. See the situation below assuming a 2 of 3 transaction with a theoretical merchant processor in the middle:

1.Alice wants to buy shoes and sees the shoes she wants on bob's online store
2.Alice send Bob 1 BTC
3.Bob see's the Payment and sends the shoes in the mail.
*Bob has not been paid yet as Coinbase need to sign it?*
4.Alice wants to return the shoes as they did not fit. Alice sends back the shoes.
5.After Bob confirms receipt of shoes Coinbase sign the transaction to reverse it and probably take a small fee.
6. Alice gets her money back and Bob takes a fee for the handling costs.

So.....Bob does not get actually get paid until step 6 correct? What if a merchant prices their goods in fiat (like everyone), if they the handling fee in BTC and the BTC price has dropped 20% they've lost out. Bob has to send the goods without actually receiving the payment?

Maybe I'm not explaining it correctly but how can Escrow function well if the funds are sitting there in BTC for an extended period of time, no merchant will use that.