Not true. I thought the same thing until I learned my lesson the hard way.
Sold my iPhone 2G to a buyer in Vietnam. Paid immediately via Paypal with a credit card and e-mailed asking me to ship to a different address as a birthday gift for their sister. Said their birthday was soon, and to please rush delivery.
I didn't know any better, figured like you said that I was protected. Plus the money had already come through on Paypal (or so I thought). So I shipped the item to the address they specified in the e-mail. I immediately submitted a request to transfer the funds to my bank account.
About a week later, AFTER the funds were already in my bank account, I got a notice from Paypal saying the buyer had committed credit card fraud, and that *I* was responsible for paying Paypal back. I was dumbfounded.
I spent hours on the phone with both E-Bay and Paypal, I submitted a formal complaint to the IC3 (Internet Crime Complaint Center), all to no avail. The fact that the buyer was in Vietnam and that I had shipped to an unconfirmed address gave me absolutely no recourse whatsoever.
So, you *can* get screwed as a seller. It's been my personal experience that buyers are far better protected. I still don't think you should necessarily cancel an auction just due to zero feedback, but you should be aware of when you are protected and when you are not.
I just sold my 3GS for $450 to someone in the UK. In my auction this time, I excluded Southeast Asia, Africa, Russia, and South America, because their postal systems sometimes have issues with loss of packages, theft, etc. I also made my only international shipping option USPS International Express, because for your money it's the most reliable and trackable option. And obviously, this time I didn't mail to a non-verified address.