I may be missing something here, but I think the seller wants you to pay using PayPal gift transfer. This way he doesn't pay the 3% in credit card charges. It is the equivalent of a wire transfer on his end, although he might have to wait an extra day or two for the cash to be in his account. Note that this is really supposed to be used for "family and friends" transfers, not e-commerce.
I think that the eBay protections still apply. If this were me, I would fund the gift transfer with my credit card and eat the 3% fee. For an extra $10, I get "belt and suspenders" protection, knowing that both eBay and my credit card company have my back if the deal goes sideways.
This is why we say to buy the seller not the watch. A seller who wants me to take all the risk and pay all the fees makes me nervous. Remember that credit card fees protect both sides of a transaction. The seller is guaranteed to get the money so long as he acts in good faith and you are guaranteed a refund if he doesn't.
American Express...Don't leave home without it!
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