I do not have all the facts, and do not know what you wrote in your complaint, but I recently had a similar situation (not the one I quoted above) and PayPal resolved it to my satisfaction.
Briefly, I purchased a set of charms. One charm was missing. I contacted the seller (not an Etsy shop) several times. They did not respond. I opened a complaint with PayPal. I requested that the price of the charm + partial shipping costs be returned to me. After a certain period of time, PayPal decided in my favor and reversed the full amount, shipping and all. I did not have to return the items I did receive (which felt really weird, because that was not my aim).
My items were not costly, that was PayPal's reason for not requesting that I return them - they stated that the cost of shipping was not worth returning them. I think herein lies the key. I only requested the cost of the missing charm and a portion of the shipping charges I paid for it to be sent to me.
It may be that you will receive the full amount you paid (item + shipping) because that is all that will be recovered from the Seller, but if you have to return the item, maybe you will have to pay for shipping yourself.
I would call PayPal and ask what their policy is in this type of situation.
Please let us know how this turns out.