Part of me feels like a jerk, because it does suck to pay Paypal fees. But if you want to play on eBay, you have to play by eBay's rules! Ignorance of the law does not excuse it and all that. I don't really have any sympathy for her, since she's trying to play the system, and I'm not very worried about how this will affect my feedback, since my feedback's in decent shape right now. (98.9% positive - once you get past that no-longer-perfect, it's not too bad.)
If she was just someone who used her eBay account to buy and it was her first time selling, I'd let it go. But she's only used her account for selling since she started on eBay, so she really ought to know better! And the best way to learn is like this, I think.
It's also interesting from a contract-law perspective, which I am currently focused on in my Business Law class.