I did forget about jdillon's solution. Assuming it takes 13 seconds for a transaction to propagate through the network, and a block is found once every ten minutes (600 seconds), there's less than a 13/600 chance (oversimplified, but you get the idea) of a double spend getting into a block before the victim sees it, then another less than 13/600 chance of the transaction being included in a block before the scorched earth transaction is seen (if the scammer has a miner friend then all bets are off anyway remember). The merchant doesn't need to do any of this manually; their software will do it for them.
OK, I'll buy that. So there's a non-zero chance that the scammer will get away with it scot-free (get their btc back), but in every scamming attempt, the scam attempt will result in a 587/600 chance that the receiver doesn't receive any btc (unless they want to try a cat-and-mouse game of some sort with the scammer up until the next block is found).
A rational scammer will only try this scam if their expectancy is > 1, in other words if the refundable fee is < than some smallish %. But a scammer who places value on the thought that the receiver will not get paid can execute the attack at will (albeit in return for the surcharge), with the added bonus that they also might get their btc back.
This means that the vendor needs a higher refundable fee to discourage such practice, and they also need to add a non-refundable surcharge to cover their losses. As long as this surcharge is less than 3-ish percent, it will be comparable to credit cards (which removes an advantage of Bitcoin from a vendor's point of view).
Now that Bitcoin is gaining some public traction, explaining all this from a PR point of view would be just about disastrous, if you ask me. To consumers: you have to pay an extra 10%, but it's refundable. To vendors: any consumer who wants to can rip you off, even though they aren't likely to benefit financially, so it probably won't happen much.
But more importantly, what is it that we'd be left with? A more complicated system (both technically and PR-wise) that that accomplishes the same thing as what we had before: instant payments still aren't guaranteed, and so they cost the receiver. So where's the advantage?
If anything, I'd
prefer a Pay by Fee that didn't include scorched earth. At least there I see some small advantage: nobody should trust zero-conf transactions (although I still don't like it).