Thanks for the advice everyone. While this thread was brewing last night, the buyer Paypal-ed me. I initially told him he could do it, so I feel I need to honor that.
Next time I deal with someone new, I'll ask for a USPS MO.
Guys, back up a moment - USPS money orders are the single most couterfeited currency in the United States today. The post office, based on first-hand experience, is unable to determine if a money-order is the real thing or bogus for approximately 6 weeks. I know because I handed them a pair of money orders and asked that they be verified.
I have NO idea why this is an impossibility, I can only assume it is akin to their inability to determine delivery confirmation for 30 days. Fed Ex can tell me where a package is any time between here and halfway around the world inside 12 minutes.
If you are not happy with Paypal entirely, then insist that the paypal come from a bank. If you are not comfortable with paypal period, honestly, I'd call western union to ask about their practices concerning their money orders. I bet WU can look up a money order in a flash and determine if it is the real thing. If we are discussing a big-dollar money order, I want to know it is real. A friend of mine deposited $4,000 of postal money orders and discovered 4 months later than they were fake and he was on the hook for passing a fraudulent check.
Bottom line, however, is that if you feel funny about the deal, don't do it. But if you still want to take the chance, I'd protect myself a little more. You may even want to go so far as to set up a second bank account to have funds wired directly to that account and then take the funds out as soon as the payment arrives.
Maybe overkill, I admit, but if we are talking about custom knives from noted makers, we can all admit that a $2500 loss could really hurt.