Also with Direct Checkout on the transaction receipt page there is a drop down buttons that stays manage order that gives options for the listing -- refund, partial refund, etc. You can also choose this option on the DC section of your shop. Paypal has a issue refund button on the transaction receipt page as well. If these options are not available, I would contact Etsy staff. Above all, don't worry about it, it will work out.
Audrey,