He pretty well has to close his case. The advice is what he got for dealing with a scammer. In this case, hmm, I think he left out a lot of information when he spoke to the clerk.
Personally, I would suggest that since you have the product, that you should refund him now.
That will end the case without a Defect to you.
Then you can, if you want, make a Fixed Price /Immediate Payment Required listing for him using his name as the title and with the cost set to cover your costs for shipping, return shipping, and re-shipping.
If he is not willing to pay that, within the deadline you give him (about 48 hours is reasonable), then you add him to your Blocked Bidder List, Revise the title to something more saleable and find another buyer.
You'd probably want to adjust the pricing too.
Yes, you are going to be out the return shipping if he remains flakey.
Yuck.
Not every transaction will go smoothly*.
Or you could call eBay through Help and Contact during weekday business hours and explain the situation.
Ask them to close the Dispute on the basis that he did not receive the shipment because he did not pick up the shipment.
Be very polite and calm.
Do not be afraid to ask for a supervisor.
*Cookie jar Insurance. Just sayin'.
