I'm a TopRated Powerseller on eBay, and yes, everything is in the buyers favour now. They can buy something, complain about anything, get a refund easily, and then ruin your reputation at the end of it all. Disputes will end in the buyers favour most of the time, and as a seller you can't do anything except leave them good feedback - so cant even warn other sellers!
All you can really do is ask for the item to be returned. Once it is returned inspect it very carefully, it needs to be EXACTLY as you sent it, otherwise you need to inform PayPal. Once you are happy with it, you can issue the refund.
I usually place a section in my selling policies, which are on every auction listing, to state that I refund the cost of the item only, not the P&P. However, most of the time i have to refund that as well as the cost of the item. Sometimes you need to even cover the cost of their postage for returning the item as well, to ensure they don't leave you a negative! Before buyers didn't leave a neg since they knew they could just get one back. Now, nothing is stopping them from ruining your online reputation.