Good to know that PayPal may stick up for you.
Before I received a couple of damaged items, I would have been in complete agreement with you. But give the seller the benefit of the doubt until you are certain; you need the seller's cooperation, and, in the end, you as the buyer have the most to lose.
I have received two damaged items bought via Audiogon. In both cases, I was incredulous that the seller was trying to get the shipping company (or me) to eat the cost of pre-existing damage. I could not believe such damage could happen without the outside of the box being destroyed!
Fortunately, I did a thorough inspection of the packaging before I contacted the seller. If I had started making accusations up-front, I would have lost the seller's help in resolving the issue. I still can't believe some of the damage, but once I really looked at it, I realized that the seller sent me an item in mint condition and well packed.
I don't think TitaniumHead will mind if I share this pic of the packaging he sent me when we were comparing notes:
The far cross-brace of the foam is positioned to protect the tweeter. Compare the amount of stress marks on it vs. the two sides. Look at the tears in the corners.
The center is relieved to provide clearance for the tweeter & the tweeter is recessed within the speaker front, yet you can see the circle in the center of the cross-brace where the pad is blemished from contact with the tweeter. I don't know how much force it would take to compress the foam far enough to crush the protective screen of the tweeter, but this foam has been there! Paradigm has the resources to properly engineer/design their packaging to withstand the rigors of normal handling. These saw some serious abuse!
Sure, the seller could have "doctored" the packaging to look this way.