For some reason this discussion is beginning to turn rather nasty. I'd like to be more analytical and focus on resolving the problem.
"orphanitems" did make a mistake. It shouldn't have been made, it's against eBay policy, but it's done now, and with your otherwise perfect record, I doubt you'll make it again. The solution in future of course is to either eat the excess shipping or immediately revise/correct the shipping rates in your listings.
The buyer made a mistake in sending threats about FB, and possibly, eBay made a mistake in siding completely with the buyer - since we don't know exactly what the buyer said, it's hard to say if eBay's decision was correct (IMO eBay customer service basically just reads off the policy pages; they don't apply good judgment). However, that's done now too.
This used to be called a "Mexican standoff", one party in each corner unable to budge, and the item remains unpaid. The buyer is now blocked from paying anyway (per eBay's advice!), and the seller has no desire to remove the block and complete the sale (which would go against eBay's advice to block the buyer in any case).
From what's been stated, it appears eBay will remove negative FB/DSRs regardless of the outcome.
Therefore my suggestion would be: contact eBay and ask if they will cancel the transaction under the circumstances, based on the report you submitted and their own advice. Granted, a forced cancellation is a very unusual request, but they've painted themselves into a corner with their own advice, basically telling you not to deal with this buyer, so it may be worth a try. You also have an almost perfect record as a seller, which may work in your favour with eBay.
You may need to provide a more detailed explanation about why the situation is at a complete impasse, i.e. why neither buyer nor seller can conclude the transaction now, and that it would be unfair to ask you to complete, since they (eBay) have stated that the buyer has breached eBay policy and advised you to block him.
If the representative you speak to is confused or unsure about what to do, ask to speak to an account manager -- they seem to be somewhat more sophisticated in their understanding of eBay complexities.
If eBay says this is impossible, you may have no choice but to close the transaction yourself somehow. At the worst you can remove the block, and either accept payment and ship (along with an apology, if you wish), or file an UID if he doesn't pay, then apply to remove any negative FB that is left.
Hopefully you'll be able to squeak out of this ugly situation, but you need to take steps to ensure it never occurs again.
BTW, I've had lots of listings that go "out of date" on shipping costs, but I just consider it as a discount to my buyers, and always absorb the difference myself. If you're willing to do that, you can avoid having to revise each and every listing. Since I frequently give my customers shipping reductions anyway, this works well for me on the older listings - a lot less work than trying to forever keep up with Canada Post.
