He has no foot to stand up. You win!
1) Immediately leave a negative. You said you want to wait, but trust me, you're going to get him NARU one way or another, and then you won't be able to leave the feedback! Also, leaving it now helps you get him NARUd.
2) Close the SquareTrade investigation. It can't help you, only him. Keeping it open only makes it looks like you're at fault and possibly willing to compensate with this guy. Forget it!
3) Pull his contact info. His account looks really old (and possibly abandoned). If it seems like the info is old or false, report it, and he'll be NARU.
4) File to have the negative feedback removed. You might wait until he gets NARU to do this, because then there's no question - it will be removed.
5) Agree to a refund if he ships back first. He won't, and the PayPal investigation will close in your favour.
6) Don't communicate with him again.
I bet the guy is a competing seller, using an old abandoned account to not only discredit you, but waste your fees and generally harass you. Even if you don't get him NARU for invalid contact info, you could file to have the feedback removed under the grounds that he purchased from you solely to harass you. Yes, that's one of the options. Since he did a Buy It Now, and has no feedback in the last... long time, I'm pretty sure that's the case anyhow.
Here's the link.
http://pages.ebay.com/help/policies/feedback-removal.html