need some ebay advice

you've received some excellent advice. As a seller on ebay myself, I would never refund any $ until I received the item back. Then I processed the refund so that is not unusual at all. Just take a ton of pictures, make copies of everything and you'll be fine. Good luck..
Scoutfinch910...you sound like an honorable seller a buyer can feel confident doing business with!
 
Just another point to add, this is totally up to you, but I agree that you wouldn't be asked to send the bag back if you paid via Amex. If you send it back she can just relist ...

The same thing happened to me. I unknowingly purchased a fake bag and in my case, the seller refused to refund me. I got my credit with Amex without sending the fake bag back to her. It is now in the hands of my 3-year-old niece. Of course, the seller never corresponded with me after she refused to refund me.

Lorimatthews is quite correct, AMEX will not overtely state you should return the merchandise. Lori seems to have had a nasty seller; you seem to have a cooperative one. Yes, the seller may relist...but do so stating it is a copy and that's OK. The seller may relist....and claim she does not know if it is legit as she did in your case....but then it is up to the buyer to start asking questions as she is not the original owner. But then you can report her to Ebay should you desire. The seller may donate to charity, wear the stuff, whatever. If it were me (yes, I've been there with nice and not so nice sellers) is to return the merchandise to show I am above board and get the quickest possible solution in my favor....without hurt to any party. Sometimes a seller does not know specifics about an item which means they probably got it at auction, a thrift shop, etc., and they are just trying to make a buck without being evil. When it comes to really high priced designer goods where they claim it's authentic and it is not, well that's just outright fraud. Suggestion: listen to this Board and AMEX....and do what makes you feel comfortable.