I see the amount of that protection advertized as 1000 dollars:
Clearly, you are getting the shaft. Clearly, your account of the facts is more believable than either PayPals or the sellers. The sellers credibilty is seriously damaged by the HD non-authentication. PayPals by not adhering to their own published policy.
contact the Nebraska state AG office. Be sure to let them know this was an international transaction. That may help you.
There was some discussion about this sort of thing at the sucks site, containing a valuable contact name, female I believe, at the NE State AG office. It seems as soon as it was learned it was over the US border, some other rules came into play.