Thank you all for the responses but it appears that posting to this forum gets you many opinions and not a lot of real legal advice. Are there any actual attorneys with consumer law experience posting to this site?
The Amazon A-to-Z claim system is called a "warranty". My purchase was under the umbrella of Amazon.com and is fully covered by this warranty in case anything goes wrong. If I buy something from them and it turns out to be misrepresented by the third party seller, or "materially different" in their words, then their policy is that I am entitled to automatically receive a refund on my claim. It was the seller who tryed to abuse the system by listing an older, lesser model camera item in a different condition, listing it as "Like New" which is trying to cheat to get a "Like New" price when it's not, and then stating otherwise in the comments which is not allowed. Perhaps it was all a mistake on his part but he didn't follow the rules. And he got caught. (And I noticed he had other items listed in the wrong condition and trying to cover it in the comments--he was going to get caught eventually).
When I purchased the item I entered into an agreement with Amazon, part of which includes that I have warranty coverage if the seller sends me something which is "materially different" that what was on the listing page. This coverage is one of the reasons I buy from Amazon and not from some other no-name site. The seller also entered into an agreement with Amazon to honestly represent the items he lists, and not to list for sale a newer 2010 model (II) and then ship the buyer and older, less valuable 2001 model (I). His agreement with Amazon is also to fairly represent the condition of the item, which he also did not do: He listed as "Like New" an item that was clearly used (paint missing) and had no manual or retail packaging.
I consider his letter a baseless threat and he lives in another state with no jurisdiction over my state so if he wants to sue me he would have to come here and file a suit. I highly doubt he has the time or the resources to file a suit he will likely lose because it has already been arbitrated and resolved by Amazon. When the seller signed up to sell on Amazon he agreed to follow their listing guidelines and it's no different from a PayPal dispute or a credit card dispute where PayPal or the card issuer finds in favor of the consumer. I have never heard of a consumer being sued directly in an instance where PayPal or a credit card company found in their favor. I believe there are arbitration laws in effect that protect the consumer from such lawsuits. I have heard of plenty of consumers suing businesses over shady business practices, but I have never in my life heard of a single instance of a business suing a consumer over a payment dispute resolved by a credit card company, etc. Then again I did read about some jackass suing an eBay buyer for simply leaving negative feedback!!
I am not going to respond to this threat except to possibly inform Amazon about it if this person takes additional steps to harass me. I don't necessarily want to do this as this seller could lose their selling privileges (Amazon is VERY strict) but I considered this case closed when Amazon honored my warranty. Once a claim is filed, communication should be through the Amazon claims system and I'm sure that Amazon would frown on a Marketplace seller sending threatening letters directly to an Amazon customer. They consider me their customer, not his, (they won't even give him my email address) and this results in very "poor buyer experience" to use Amazon's words.
If there are any attorneys with experience in this area I would like to hear from them, especially if you know of any cases where a business actually sued a consumer after the consumer received a dispute resolution in their favor from Amazon, PayPal, or their credit car company. Thanks everyone!!