Quoted from gdeleon:
Once a dispute is filed, the money will immediately be taken from the Seller's PayPal account, and the seller will then be given an opportunity state their response to the buyer's claim. In 99% of the cases they will side with the buyer, so the seller should plan on losing their money regardless of how ridiculous the buyer's claim may be. If the seller already spent or transferred the funds away from PayPal, PayPal will then go after the seller's bank account on file, or attempt to charge it to a credit or debit card the seller has on file.
In the end if this happens to you, expect the money to be taken away (never to return), and your pinball machine to be stranded far away in another state (with you having to pay shipping to get it back). Thankfully this has not happened to me, but I know a few people that have had this happen to them.
The moral of this is, do not take PayPal Friends and Family payments from someone you don't know.
I agree to all of your points essentially. But I just to clarify for the buyers out there, if seller removed money from PP & linked account(s) then has a dispute opened, the funds are not always immediately taken from anywhere. You can be stuck in dispute purgatory for a while as a buyer, or have a seller "refund" you while not having the funds to clear the payment. Thus you win the dispute but receive nothing for a while. Just had the later, which took 3 attempts to pull from the seller's bank account, nearly a month to recoup funds for an item that was never shipped, only a label created. It took "reaching out" to their family members, to prompt the seller to actually give me my money.
Moral of the story, be careful with Paypal in any capacity.