Last update, it looks like. As several of you predicted...
"I paid to have the phone repaired so I will keep it. Thank you"
So looks like he blinked first. I was perfectly willing to have him ship it back, assess the damage, and then try to sell it again.
Thanks for all of the suggestions and tips. Definitely a enlightening and frustrating experience.
Now hopefully he will close the case and not leave me negative feedback.
Should I bother to report "abuse of returns" or just consider myself lucky and let it go. He'll probably try to pull this again on someone else.