See that's the problem. Yes, you can probably win in small claims court - BUT in order to file and adjudicate the case, you have to travel to the other party's state. Just doing that alone will probably cost more in airfare than the amount of the transaction, and your travel expenses are not compensable in court.
But it's even worse than that - just winning in small claims court doesn't mean you actually get the money. You will probably have to spend months, maybe years (occasionally decades) pursuing them until you are finally able to garnish their wages or otherwise force the transfer. In many cases, they can also just file bankruptcy and then you're out of luck.
You will probably win in small claims court if you go that route - and it will probably double the amount of money you lost. It's a travesty but it's true.
I know the original thread is very old, but PayPal is still terrible. I recently bought a product for $80 and the company sent me the wrong product, so they agreed to do an exchange for me. I sent it back, and they kept the product and never sent the replacement. They literally took my $80 and left me with nothing. PayPal was no help then either.
You would probably be better off giving your product to charity than selling it on eBay. At least you're giving it away to an honest and deserving person (hopefully) instead of giving it away to a thief.
Next time I sell something on eBay and it's expensive, I'll state very clearly on the description that I won't send the item until the cleared funds are in my bank account. At least then it's not PayPal holding onto them