if its still useable and you are willing to use it like that then i dont see a problem in keeping it. but i dont think you should get money back because you are keeping it.
all in all, if you arent happy with it (which you arent because thats why you contacted her), then follow through with a paypal dispute.
Again, I respectfully disagree. OP paid XX amount for what she thought was a perfect new wristlet. She would not have paid that amount for one that was less than perfect (as this one is). It may be useable, but not what she paid for, so she is entitled to the refund. It is like purchasing a damaged bag on "Final Sale."
If she wants to keep it and use it as is, then she should definitely get some $$ back. Sounds like the seller is offering to do the right thing.