Take the return, if the buyer wants a refund rather than replacement that's fine.
I never get into the details of what the refund will be (shipping included or not). When you get the item back and confirm it's ok then issue a refund for the original amount less shipping.
If the buyer isn't happy with that you can go from there but at that point YOU hold all the cards.
"I never get into the details of what the refund will be" This should probably be "I WOULD never" because I have never had a buyer want to return an item other than when I have made a mistake.

"What else could I do? I had no trade so I became a peddler" - Lazarus Greenberg 1915
- answering Trolls is voluntary, my policy is not to participate.