As far as the dispute goes, I would file it the same way. After all, you DID NOT receive the item you paid for in good faith.
I would not return the item to him at all. First, it is illegal to place "return to sender" on a package that is already opened. Second, all he is going to do is sell it to someone else. Save that person the grief as well.
Oh, what is the seller's name and what were the items?