Sent a pirated movie from seller on eBay. Help?

I bought rare DVD from eBay for $30 + $10 shipping. Thought it was a great deal (I've been watching for a while now and rarely does it fall below $90). Seller had 100% positive feedback, over 300 people providing feedback so I figured it was pretty safe even though it was under-priced.

Well, turned out to be a clear copy. Can read "Memorex printable DVD-R" right on the DVD. Cover image and image on the DVD poor quality pixalated, etc.

Not wanting to screw around I immediately opened a dispute. One does not 'accidentally' sell pirated DVDs - this is, in my mind someone intentionally trying to screw someone over.

The seller has through the PayPal resolution center has admitted that it was a downloaded uk copy and they seemed at first baffled why I'd have anything wrong with it. Initially denied my request for a full refund, but within a few hours offered to refund and pay $4 for shipping if I'd removed the negative feedback I'd left. I'm not going to remove the feedback, so now they're asking me to ship at my expense with registered mail. I checked - that's going to cost me $19!

If it was an honest mistake or I changed my mind I'd be happy to pay for return shipping, but I'm at a loss - should I really be on the hook for nearly half of the price just to ship back an illegal item they may very well just turn around and try and sell again?

At this point I'm thinking I should just let her escalate if she disagrees. Doesn't look like I have much to lose by escalating - since I'd already be out half of my money if I pay for registered mail myself.

(Sorry about the category - there doesn't seem to be a good one for eBay questions anywhere)