The paypal protection doesn't really offer you much assurance anyways. If he really wanted to screw you, all he has to do is empty his paypal account. When you file a claim, paypal sends the other person a notification that a claim has been opened against them, giving them ample time to clear out the funds. If/When paypal finds in your favor, you still won't get any money back and the other person will just open another paypal account.
Good luck with getting your situation resolved. When it comes to buying from people over the web, it's a crapshoot regardless if you use paypal or not.
Paypal will put a hold on that amount of funds as soon as a claim is filed. The seller has no opportunity to empty his funds. That's of course if..... He has funds in there to begin with. But I agree if he was out to screw someone he would have transfered the funds long before that point came. Overall if the seller has 20 or more feedback I send as a gift no problem. I don't think he was out to screw you unless he would have not replied. That is the risk we all take as buying used. Do not over pay for anything used because this can and someday will happen.