Just because the first eBay rep told you that the feedback doesn't qualify for removal doesn't mean that you should give up. Contact eBay Customer Services again, using the Call Me Back option, and argue your case for the removal of the feedback. Tell the eBay rep that you believe that the winning bidder who asked to cancel only did so with the intention of disrupting the auction, which is against the rules, and subsequently left you bad feedback when you cancelled the sale as per his/her request. Point out that as the buyer specifically asked you to cancel the sale he/she should not have been allowed to leave you feedback in relation to the transaction, and really ram home the point that the feedback ought to be removed as the cancellation was the choice of the buyer, and not as a result of you reneging on the deal. If you get through to an eBay rep with an ounce of sense then you may be able to get the negative feedback removed, as well as the associated defect.
With regards to the sale of this item you could try making a Second Chance Offer to one of the bidders who lost the auction to see whether or not he/she would still be interested in buying the item. If the Second Chance Offer bidder was gutted to have lost the auction but subsequently gets offered a second chance to purchase the item then you may well be able to sell the item without having to relist it for sale, and you wouldn't even be breaking any eBay rules with regards to selling if you did indeed decide to send a Second Chance Offer and ended up selling the item to the Second Chance Offer bidder as a result.
Finally, if you cannot block the buyer because his ID is not valid then I would suspect that eBay may have thrown him off of the site and closed his account, in which case if that account no longer exists then that may be the reason as to why you cannot block the buyer. If you suspect that to be the case then use that as an additional reason for the removal of the feedback - if you click on the buyer's User ID and it says something like "No longer a registered user" then it is likely that eBay have closed his account and kicked him off of the site. It takes ages for a user to close his/her account down, so I would say that the most likely explanation is that this buyer has had his account closed by eBay and been chucked off the site for good, possibly for dodgy buying behaviour. If so then that should strengthen your own case for getting the feedback removed. Unless the buyer was also a seller he would not have been able to block you, and even if he hadn't been chucked off of the site and had added you to his Blocked Bidders List that in itself would not stop you from adding his User ID to your own Blocked Bidders List.
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