Paypal will not help you in this case. They only refund your money under buyer protection if it is an eBay auction.
Outside of eBay you can only get your money back if the seller still has the funds in his account (tried it) So even if you win you loose.
IMO you lost the watch when you posted it w/o tracking. Purchase your next rep at another dealer and forget about the whole thing.
I don't see how this can be part of any dealers customer service to replace an item he didn't receive and I'm sure dealers selling hundreds of watches won't scam a customer for a single watch. If you were on the other side of the counter I don't think you would offer that kind of service either.
Move on to the next watch and let it be is my advise.
To rage and mock is gentlemanly, to grumble and whine is not