http://www.etsy.com/help/article/2037Tells you how to refund with pictures.
The short hand is:
Your Shop (top right)
Sold Orders (drop down)
Receipt # (right side)
Manage Order (right side)
Issue Refund (drop down)
You can do partials from that menu.
You can't cancel part of an order. The full amount (price + shipping) for the whole order has to be refunded to cancel an order.
