Personally, I wouldn't do it unless you agreed to mutually withdraw. If this is the same as your other thread, where the seller never shipped your bag, then no, I wouldn't agree to it. That's really low, IMO. What he did was wrong—you won the auction, paid for the auction, he never shipped it out, you file a dispute through PP, PP sided in your favor and refunded you your money, so why would he STILL want his FVF's back? That's just cheesy.
Don't respond. It won't hurt your money either way, he just wants his FVF reimbursed.