I do not think that he will do anything in the sellers favor, because, he will get his money back in a sure way, because, has filed an unauthorised transaction dispute and he has nothing to lose. if he gets the site, then it would be ok otherwise it will not hurt him. :/
if you're the seller, most of the time, the buyer gets away with it. I'm sorry man, but that's the truth. I can speak from experience. Paypal is not the way to do big transactions like that. They are shady.
Why use Paypal? I will never use paypal again? They will refund to buyers without protecting the seller, seize your funds without any reasonable excuse. I'm happy you got your domain back. Try not to use paypal for risky transactions.
contact your domain reseller , tell 'em full story & submit necessary documents. if solved;then try to point your nameservers to old hosting & collect backup!
I stopped making big transactions as a seller with paypal a long time ago. I use eGold instead. No charge backs. But not many people use it. Is there any other company that could be used for something like this?