In your situation the other member made a personal choice (which I agree with and would do the same myself), but he was under no obligation to make that choice since the PO is who mishandled your end of the deal.
In situations where buyers lie and say they never recieved their item in order to "scam" the seller or Paypal is not he issue here IMHO. The situations being discussed in this thread are when the package has been labeled as delivered by the courier, in this case USPS, and the buyer has not received the item.
These situations are a result of the Post Office not fulfilling their obligation to properly deliver the package to the customer. When anyone sells online and uses a courier service, the seller is under no obligation to pay extra money for insurance, signature confirmation etc. unless the buyer requests the extra service, and especially since those extra services are no guarantee what so ever that the courier will fulfill their role in the transaction.
If the buyer and seller are both honest people and have fulfilled their ends of the deal, they should both contact the Post Office responsible for the missing item and force the PO to fulfill the service they have been paid to do, or properly compensate both affected parties.