I've dealt with them extensively and they certainly have not behaved dishonestly to me. One simply should not expect that KEH.com - or any other 2nd hand seller - is going to conduct an extensive inspection of a camera that they are going to sell for, say, less than $150 USD. It's simply easier to have the customer return the camera if there is a problem. As there are not many sellers that even allow for that, KEH can expect that their customers will be forgiving in such circumstances.
As for their grading system - I have already noted that it largely considers cosmetic considerations, rather than operational ones - but I've always felt that KEH.com is *conservative* in grading their inventory (i.e. items are in at least as good a cosmetic condition as they are graded).