Other day I purchased a "used-excellent" Shure SM58 on ebay for 65$ from a US seller. Turns out it is a very good looking Chinese counterfeit. This seller, besides a denial, said he would refund purchase price if I only return the mic to him first. Should I call down the 'bay on him or just try to cut my losses?
Regardless of whether the seller knew or didn't know about the status of the microphone, he owes you a total refund which includes shipping both ways.
Sounds like he deals a lot with vintage microphones. Seems kind of hard for me to believe that such a fake microphone would go unnoticed by a dealer like him. As long as you have strong evidence, insist on an absolute and full refund with no strings or conditions attached. Leave a feedback stating that he sold you a Chinese copy microphone. He may not appreciate it but you'll be doing others a service. This will also force the seller to be more careful in the future when selling vintage Shure microphones.
Just out of curiosity, could you post some photos of your Shure microphone. It would be interesting to see what a fairly good Chinese copy of a Shure microphone looks like.