ebay scam help needed?

I sold a part on ebay for a friend. It was motorcycle parts, front forks..... I sold it a month ago. After 3 weeks of constantly telling my friend, who was the actual seller to ship item, it never got shipped. The buyer took up a dispute, then a claim on paypal. The amount is something that makes this ridiculous on my part. It sold for $917, and probable the reason why I am most upset. My paypal is now limited b/c I owe that money. My friend keeps telling me that he has my money, but is avoiding me and making so many excuses, that its not even funny.

Make matters worse, it actually a friend of his parts, and the only good news is that I know where both of them live. I know both of their names and I am about to lose it. Mistake I made: they convinced me that they needed the money to be able to ship the item, so I have already given that to them weeks ago. I found out that the bike was in pawn shop and they had to pay 2800 to get it out. By the time that happened, the buyer wanted refund already. I would of never sold it If I had known that they didnt have the parts, but that is no longer relevant.

Bottom Line: I am out 900 and sick and tired of thier excuses, and could care less that they are friends. To me, this is strictly business, and could care less about friendship(no friend is worth $900)

What would you do, I dont believe in revenge(just causes more problems) so do I go to the police, or do I use the police as a threat to get my money or what is the best resolution here????????