Hi,
Suggest you refund the buyer and then ask them to agree to a mutual cancellation request whereby you get the final value fee credit and they don't get a strike on their account.
http://res.ebay.co.uk/ws/eBayISAPI.dll?CreateDispute&guest=1&DisputeReason=2&guest=1
If you make them follow through, then you risk them finding fault with the item and possibly deliberately damaging in order to open a dispute!
Add them to your blocked bidder list.

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