Overpaid for this WOC, should I keep it?

You paid for a hard to find item in NEW condition, and that's not what you got.... I would return it and leave the seller appropriate feedback for sure! I would also do the best I could to have them refund the shipping cost as well... Are you guaranteed they will go through with the refund? or did you use a credit card that will back you up so you can dispute the charge if need be?
 
I've been in this situation a few times with designer purses. A lot of the time you can work it out with the seller and make a deal. When you open up a case against a seller it can hurt their performance and discounts if they are "Top rated". They usually want to peacefully resolve everything if they care about their discounts!
 
Return it and advised the seller to pay for return shipping as it was not your fault for them misrepresenting the product. Be firm and demand it. It's too much money to pay for something used that cannot be restored. You will find another.
 
Agree with what everyone's been posting. I'd ask for a partial refund as it is an item you've been looking for. If that doesn't work out, definitely return and leave appropriate feedback!