Right, Fred, it's as you said. F&F just means that neither side should expect Paypal protection, but it doesn't mean that Paypal can't get involved like it did here. (Paypal will probably limit both parties accounts going forward. However, you can probably just establish a new paypal account under your wife's info (or someone else in your family) and a new bank account if you need to.)
What you'll need to do to prevent the scenario that you mentioned above is to contact the Post Office and find out what is the soonest that you can file an insurance claim for a package not being delivered, and do that as soon as you possibly can. The last thing you want to happen is for the Post Office to deliver the package after paypal pays the claim out of your pocket. Then the Post Office would not reimburse you. I'm not a lawyer and have no clue what I'm saying here, but if that situation did occur, the buyer may be guilty of mail fraud, and you may be able to do something there.
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