Shouldn't the seller have to pay for the return shipping? I mean, the whole idea of the paypal process is to make you whole again, but if you end up being out $10.00 or whatever the return shipping costs, then you still lost money in the process. Maybe email Paypal and ask them what is the next step?
***edit***
Oh I just saw the auction link. Be glad you aren't keeping that bag. I know I mention this all the freakin' time it seems like *L*, but we had a few of the same dusted gold bags at the outlet and they ended up going up on clearance because they stained/spotted pretty easily. Even as a final sale super clearance we couldn't get rid of some of them.