Not agreeing or disagreeing with anything here but a couple things:
Sometimes product comes straight from a manufacturer with another label over the serial number, or even written in. Sometimes things happen to a box, and they have to put product into another box. So having something written in over the original isn't necessarily something the seller did.
With respect to Paypal, the seller might not have been malicious in wanting the money sent as a gift...when sent as a gift, there are NO FEES for sending the money. If you send as a purchase of a product, the seller loses money in fees Paypal. He might have just been trying to get all he could back on this sale, by giving a low price and hoping to not lose money to paypal.
Not saying anything is right or wrong, but after reading all this......thought I would throw some of this out there.
As for the camera, things happen, whether new or not. As a seller of anything its up to you on how you fix the issue. The seller has stated his policy. As others have said, buyer beware. We have a consignment room, all customer owned, that is an all sales final room. Now, when items are agreed on price, sometimes the seller will say " if it doesn't pass hydro, I will give your money back" others say buyer beware. If you don't ask, I do believe in a little bit of personal responsibility in not finding this information out in the beginning.
Ebay has been around for a long time, people should be used to buying things online and asking questions before purchase. If your NOT, read this thread and learn to ask questions. A lot could have been prevented with a few simple questions before the sale was completed.