You have to sue them. Have your attorney draw up a letter to demand payment or return of machine in it's original condition. Have the attorney explain that you will sue for the machine, damages, and ALL costs. This might be enough to scare them into returning the machine. Any judge in the world will tell them, you got your money back, you must return the merchandise. I would also be on the phone with paypal working up the ladder to get an explaination of other and making sure they know that they are condoning theft of merchandise. Paypal sucks!
Oh wow, I just re-read your last sentence. You took F&F. Sorry dude, you caused your own issues. They probably have sold the TZ by now. See, they paid you with F&F on their mastercard. They called Paypal and paypal told them sorry, we are no help on F & F payments. So they called Mastercard and claimed fraud. Mastercard then charged Paypal back. Paypal calls you and decides they really don't want to deal with this and chalked it up as "other". Too bad, so sad. You are a business and you circumvented Paypal fees. Paypal is not going to do ANYTHING to help you. Court is your only option at this point.
When is everyone going to learn that this F&F payments through Paypal is not meant for business transactions?