You are right.
He is wrong.
He won't ship.
EBay will charge him his listing and selling fees (which can be as much as 20% of your payment).
EBay will also put a Defect on his selling account which can mean he faces restrictions to the number and value of his future listings, a rise in his selling fees and possibly even the closing of his selling account.
You on the other hand, may be able to leave feedback. The most effective feedback is calm and factual. "Refused to sell for advertised price He cancelled sale refunded payment."