Just playing devil's advocate. What's to say that there is any problem with the AVR's center channel? Maybe the buyer is hoping you take his offer and he gets a nice discount for a perfectly functional AVR.
In your place, I would have the AVR shipped back, if not for anything else, just to confirm that it malfunctioned (or not).
I've already thought about that. While the guy seems extremely honest he understands that, with the claim already filed, the insurance company will pick up the receiver and he will not be allowed to keep it. The ironic part of this situation is that he already had the same receiver and his is no good. Unfortunately I didn't note the serial number before shipping so anything can happen. He opted for "possibly" getting back half his money and keeping the receiver. I won't know which way he wants to go until around Thursday when his money is downloaded from Paypal. At that point I will either give him a full refund and the receiver go to the ins. company or give him his partial refund and he keep the receiver.
Unfortunately, if I have him ship it back to me I just incur another $70-$80 expense although I would probably get to see if my receiver does come back or not. This is definitely a no win situation. The easiest scenario would be to just give him back half and forget about having to fight the post office and their insurance company.
If I do ever ship such an expensive component again I know to record the serial number, lesson learned.