Actually, Paypal is really good about protecting whomever NEEDS protecting. If your auction said As-Is, AND you got shipping insurance, then from my experiences with Paypal - you should be covered.
Whether he IS running a scam or not isn't important, what IS important is that you did everything right. You tested it before you shipped it. You added a disclaimer in the auction itself. You got shipping insurance. You did your job the best you could. I personally wouldn't worry about it - ESPECIALLY if he paid through Paypal (which I sincerely hope he did).
In any case, try to save any and all correspondence with the guy, just in case you need to refer back to it later. I imagine it will go away if you just refuse to participate.
