first off, thanks for sharing the awesome cards but a sad twist too. The card looks alright on the pics on ebay, maybe he messed with them or messed up the card after he made the pics, either way the card is now damaged. From the pic you gave here it is a damage alright, but not one that would make many of us player collectors from keeping a 1/1 in PC /i have a few myself, not maybe as damaged, but yeah/. Maybe the actual damage is worse than i can tell from the picture, so i dont know. I would do anything to keep that card in my PC, i would bite the condition even, but again, its hard to say when i dont have the card in hand, i admit. The one chance you have is with Panini. Also, you say he wants it back and maybe wants more money for it. Well, i dont see how that would be possible given the state of the card, although if he alters the card somehow to cover up the damage then everything is possible i guess.
Tough situation and i feel sorry for you man, as a player collector, a 1/1 is a 1/1. And if you go for every card of your player than its a real disaster, unlike other collectors, you cant honestly say to yourself and mean it: be it, there are plenty other cards i can live without this one.
But dont let bad experiences /more than one, granted/ get the best of you. Take some time off maybe, and then take actions with the collection. Dont act too quickly otherwise you may regret it very soon.