Not trying to be argumentative or minimize your experience/opinion... but I was an expert witness for a friend's dispute. It was a matter of residual value assessment after an item was broken in transit, not a substitution of product issue. Ebay/Paypal was very straightforward in what they asked for in terms of information and proof, and then resolved the matter quickly to the satisfaction of both buyer and seller.
In another situation (my own, this time) I was dealing with a seller who offered an item that he could not send because he didn't possess it. After several email exchanges with the seller where there was no confidence that he could even get the part, I asked for a refund. He stopped replying to emails or phone calls. An ebay/paypal action was initiated for a refund and that was accomplished in less than 2 days. I don't think this guy was acting criminally, just too lax an attitude for my needs -- I couldn't wait until "whenever" to get my goods.
Thanks for the examples Brian, but my question is really more about paypal outside ebay.