You are being given wrong information by people who don't know what they are talking about. If you file a PayPal complaint, you will still have to pay return shipping.
There is a NEW eBay complaint procedure. You file an eBay complaint, then they give you an 800 number to call and they refund everything on the spot, and eBay handles the PayPal transaction.
http://feedback.ebay.com/ws/eBayISAPI.dll?InrCreateDispute&DisputeReason=3
Fill out the complaint form AND call. Be factual, don't tell them a long story. You will not reach a genius at eBay.
Say: "The seller described the camera as working perfectly, when I received the camera it was badly damaged and not functional."
That's it. eBay set this new thing up as an extended test to better handle customer complaints because their stock price is in the toilet.