If an honest person sends paypal and the bitcoin is being held by a trusted escrow then three honest people are involved in the trade. So, no chargeback.

What I'd like to know is how the person buying with paypal can prove to the escrow guy that paypal has been sent and sent to the right person. Asking out of real curiousity as I've never had to prove a paypal spend before.

Um, OP, where's your signed message?  At least provide your wallet address with the coin in the mean time.