Good points, but if we did it outside of ebay, he wants paypal as "gift". Thats what worries me.

Ok, I wasnt aware of that then, in which case you are not protected. What I've done in the past is offer to pay the Paypal fee, which is relatively small in comparison to the Ebay fee. Say he wants $400 Paypal direct as a gift, I'd offer him $420 as a sale provided it is a sold as a "good" and labeled correctly, thus providing you with buyer protection.