I admit that situation sucks. PayPal only lets you dispute anything through them for upto 45 days after the purchase date. What happens with a charge back is that the credit card company that the buyer funded the transaction with granted buyer a charge back, and took the money back from PayPal, so PayPal took it form the seller. If the buyer's credit card had not granted the chargeback, that would have never happened. I completely agree that is a shitty situation, and like I said, I don't agree with all their poilicies, I was just trying to be informative.
If Paypal only allows disputes for 45 days and then cuts you off then after 45 days if Paypal gets a chargeback they need to take it up with the credit card company. After 45 days you guys are out remember? Can't have it both ways.