What would've happened if you did not sell and send him? What can they do?
An acquaintance of mine of long-time good-standing on eBay had his account cancelled by eBay because of an issue. He had to create a new eBay account under a new eBay user name using his wife's name and email address. Not the end of the world except that you lose your feedback totals and given the huge number of frauds on eBay, people might be wary to buy from you/sell to you if your feedback is 0 or 1.
You are correct that the power lies with the buyer on eBay and Paypal. Fortunately, I've had only a couple of problems and only one of them serious - and it was entirely my own fault through my own stupidity.
One of the worst frauds I've heard of on eBay regards selling nice watches. You ship your nice watch with all its paperwork and original box via registered post. The buyer receives it, switches the watch for a cheap replica and then emails you and eBay claiming that you sold him a fake. eBay side with the buyer and instruct the buyer to return the watch to you and they process a refund. You receive back a fake watch! Yes, you can photograph the watch from every angle before you ship it but ultimately it comes down to the buyer's word against the seller's word...and eBay/Paypal pretty much always go with the buyer.