I think that you did the right thing, in the end, Oceans. I personally don't believe that the company were to blame and over here that sort of return policy would be rather good (sending out a replacement as soon as they get confirmation of pick-up) ... many companies here wouldn't do that until they'd received the goods back and had a chance to 'inspect them'. So to me, being prepared to send out a replacement once picked up, and only refunding once actually returned sounds fine. They probably have been stung once too often, an losing the cost of a replacement is better than losing the actual $ (whatever their mark up is).
Glad it arrived and must be music to your ears.
I had an ebay disaster a while back. I bought a 19th century spelter statue (£105), and when it arrived via our Royal Mail there was a beautiful pierced whole in the carton. Unpacked only to discover an arm had been sheered off. I had to claim from Royal Mail (Parcelforce really) and three months later I got compensation the cost of the estimated repair + postage refunded (£85 + postage). I then shipped it off for the repair job, only to receive an e-mail two days later from the chap with two photos, one of the package as it had arrived (completely battered) and one of the statue minus arm number 2! I had to smile as I read that as the deliveryman walked into his workshop already carrying a battered package, he tripped, dropped the package and fell on top of it
Fortunately the driver wasn't hurt!
I claimed compensation and this time they refunded the value of the item + postage (the full £105). The second company was a courier and I received a cheque within a fortnight.
I had planned to sell it on anyway, but managed to make £85 without even having to