So accept the return and pay return shipping as the buyer requested? For what the coat sold for and what it will cost to ship back, this means I am going to lose money. That's my problem. It's almost better to cut my losses and just let him keep the thing.
$8 coat + ~$10 shipping + probably $12-15 return shipping if he doesn't use regional rate... I am now $30+ into a coat that sold for $25.
I've definitely let buyers keep items if I thought it wasn't worth it. You're going to get your ass handed to you every now and again on eBay. This might be one of those times where you issue a refund and then tell the buyer that he can either tailor the coat, wear as-is, or donate it. That's how you get repeat buyers. They see that you're willing to help out if things go poorly.