I'd wait.
If you escalate, you risk Paypal finding against you.
Or she can escalate and await a finding.
If you wait it out, there's a possibility that she won't respond and you'll win.
Thanks for the advice BB.
I don't mind getting the item back. I'd just go exchange it myself for a new one. I called PP today because I wanted to see what my options were. The rep who helped me kept trying to push me to escalate the claim. I told her I wanted to think it over. Not sure why she was pushing it so hard onto me. If she (the buyer) escalates it and PP finds against me, what's the consequence? I've already offered to take the item back. I figured they would just tell her to return the item back to me as well?