From what you said I'd be incined to say that the buyer is talking complete rubbish, especially given the fact that he hasn't provided you with photographic proof that he has destroyed the CD as you requested. If my suspicions are right then the buyer's allegations that the item doesn't work are probably false, the main objective being to falsely claim that the item doesn't work so that you issue him with a total refund and he gets a fully functional item for free, albeit at your cost.
If you want to give the buyer another chance to send across the images of the CD cut in half ask him to send the images to you via eBay using another means. I've sent images via cases opened in the eBay Resolution Centre, via eBay Messages using the Ask Seller A Question option, and have even sent images via PM on a couple of occasions. That provides the buyer with three different methods of getting the images across to you if indeed he is telling the truth; therefore, suggest that he uses one of those other methods to e-mail the shots across to you. If he won't do so then I'd say that it's because the item isn't broken at all and he doesn't want to destroy an item that he has every intention of keeping and using if he can successfully screw you over and get you to refund the money that he paid for the item.
If you believe that my suspicions are right then don't refund the buyer's money. If the buyer escalates the case to eBay and forces a refund then appeal the defect, pointing out that you mentioned within the case that you would refund the buyer's money if he could send you images to prove that he had destroyed the CD, but the buyer failed to do so. Emphasise to eBay that you suspect that the buyer has deliberately misused the eBay Money Back Guarantee in order to get the item for free at your expense, and if you really argue your case well and can persuade eBay that you're probably right then it may be possible to get the defect removed. However, given that we're dealing with eBay here nothing can be guaranteed - you may not win the appeal, in which case the defect would remain on your account and the buyer may even leave you negative feedback. Therefore, if you don't want to take the risk it may just be better to refund the buyer before he has the chance to escalate the case to eBay to make a decision upon, as that way the case would close automatically as soon as the refund has been issued.
Whatever the final outcome of this case, if you haven't already done so add the buyer's User ID to your Blocked Bidders List. If you are unfamiliar with how to do so click on this link https://offer.ebay.co.uk/ws/ebay/isapi.dll?bidderblocklogin and a big white box will appear on the screen. Add the buyer's User ID to that box, then click on the Submit button beneath it. Once you have done that this buyer will not be able to purchase anything else that you list for sale on the site, in which case he won't be able to cause you any further aggravation in relation to anything else that you sell on eBay in the future.
