Chris,
What Scott said above is true.
Plus, did you use Paypal Gift, or just regular Paypal? Many off Ebay sellers are requesting the "Gift" option because they think it saves them (translate - cheats Paypal out of) 3%. Doing this puts all the risk on the buyer.
Paypal will still protect you if you use the standard service. Open a case and tell them the merchandise was never received. But if you used the "Gift" option they will do nothing (Nor should they. You told them it was a gift and were expecting nothing in return.)
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Jim Van Brunt
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