This happened to me. I bought something off an eBay seller with loads of good feedback. Suddenly following my purchase he starts to get lots of negative feedback. I got my refund via PayPal (goods never arrived, probably never dispatched) but obviously something went wrong for him in his life that meant his business went up the wall. Perhaps it’s similar for your seller.
As an eBay seller myself I always side with the customer and refund or re-send without question. I’m sure there are some customers who will scam me and say they never received it and some genuine lost in the post but it’s just part of doing business on eBay and I see it as an additional overhead and factor this into my business model.
Glad to hear that PayPal are taking your case seriously. Bad sellers don’t do us legit sellers any favors.