Yeah, both the buyer and the seller have the private key. Any one of them can take the balance at any time with no proof of who did it. Plus paypal will not investigate matters of currency exchange, and always error in favor of the buyer.
True true... hmm what if there was email correspondence after the winning bid from the buyer stating what bitcoin address to send to? Then you would have an email from the buyer saying send it HERE. You would then respond back saying ok, it will come from my address of BLAH... and you would have the block chain info dated AFTER the emails showing it was done.
I seriously thought about the whole ebaying BTC after I saw the prices people were paying.
Yeah, that would work in theory. The only problem is that in the scenario where the buyer backs out, there is probably less than 1% of the employees at Paypal that would even know how to investigate these claims and make the correct determination. Further, it is against their policies to do so (since it involves bitcoin) so you'd be really lucky as a seller to have Paypal backing you up.
The reason these coins go for a premium on ebay is that it comes with a tremendous risk to the seller. In my opinion, it's not worth it. In times like these you can get that premium just by waiting a week!
