The Money Back Guarantee does not apply when the item is refused, or if it delivery is attempted but not successful.
So any scam based on Item Not Received would fail. (But print out those Messages showing the delivery attempts.)
When an item is not delivered, eventually it should wend its way back to you.
Refused mail is not a priority with any postal system.
I suppose ethically when you do get the item back, you should be refunding the buyer any money left after your shipping costs, eBay fees and Paypal fees.
If you cancel the transaction when you get the item back, you should be refunded your eBay fees and all but the non-refundable 30c Paypal service fee.
However, it might be a good idea to hold on to that refund until you are sure the buyer is still alive. The easiest way to ascertain that is to wait until he (or his executor) contacts you.
When you cancel the transaction, you can relist the item.