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Joann1. Cash the check. Now. Fastest way possible. It's only a matter of time before he figures out that the stop-payment fee is cheaper than the actual cost of the card. Once you have his money, you are on even ground for negotiating.
2. Up until he left the neg I would have talked refund (no discounts). Now that you have the neg I'd either keep things the way they are, negotiate a withdrawal of neg for return, or try to get the auction reversed and neg removed.
3. Block him from bidding. Then when it is all resolved one way or another send him a link to this thread so he can see that people have blocked him because of his behavior. (BTW - add me to the list of people blocking him - I don't need feedback headaches with what should be a completely routine ebay deal. Gads, where in the he11 do these people come from?)
Tough break. Really. It shows it can happen anytime to anyone on ebay.
Joann