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OP here. Any suggestions for what to do now much appreciated.
Try and call paypal and ebay at the same time again but this time ask the ebay CS person if they can approve a reversal fee and tell that to the paypal CS rep. If they approve it paypal will reverse your payment to Ebay and then once you receive the funds back you can make another payment to Ebay.

Just an idea.

Oh that's a good idea! I'll try it. Thanks