I sold a mobile phone I believed was unlocked to this woman. She says it isn't, and instead of asking for a refund, she claims she took it to a shop and paid £10 to have it unlocked - which she now wants ME to pay.
Well, if you were a retailler, she wouldn't have cause to force you to pay up (it'd be a refund/replace jobby). However, PayPal seem to be a bit on the idiotic side, so I'd watch them. They can and do take money out of your account to settle disputes without telling you (banks can't do this), although I believe if you keep your account empty, they can't take any money that isn't in there.
I only use PayPal sparingly with "known" retailers, and have never had any problems, but I know enough people who have (and their report on Watchdog wasn't exactly good either).