Paypal is going to make you send the item back to her. Make sure that when you do, you get delivery confirmation and insurance.

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"He that is of the opinion money will do everything may well be suspected of doing everything for money."
Benjamin Franklin

Maybe its just me but as a seller I would be trying to find a way to make the situation correct. I had an item that was $30.00+ in price and it was damage in shipping, due to my error. And I immediatelty responded, and gave a partial refund as the buyer wanted to keep the item. We were both so satisfied with the whole transaction that we both left postive feedback.
If I were you I would definately notify ebay. That way she cannot continue to scam under other names - they can prevent her from being user in any form.
I wish you the best of luck