| Well, it needs to be fixed and it probably won't be THAT expensive. I had a similar problem with my HBP-1 a few years back. I called Demeter and ended up sending it to them for a repair. The service was excellent, as well as fairly quick and affordable. (I don't think the symptoms were identical to yours. I can tell you the whole story if you like.)
Now, should YOU do that? I don't know. First, what are the details of the eBay sale? I imagine the auction stated "no returns", or some such. But what claims of condition or guarantees were made?
How was the seller's feedback rating? If it is very good, I doubt he knowingly slipped you a lemon. Still, if he values his stellar rating he may agree to "make it right". If so, you have to decide what you want out of it: refund, compensation, etc. I know - that's why you're posting this.
I would definitely discuss the preamp problem with your local tech. Has he worked on Demeters before? Does he need a schematic, and can he get it? They always say they'll have to look at it before they make a call, but he (is it a he?) will PROBABLY have an idea of what is wrong. There aren't that many parts in the unit.
We always wish it was "just a loose wire", and it hardly ever is. One thing to check out though, is the effects loop. Run a cord out of the send and into the return, then wiggle it. Corrosion or dust may have shorted your signal. I would expect the sign of that to be crackling, rather than the fade out you described. But it is worth a try.
Again, I believe you will have to sink A LITTLE money into this repair, but then you'll be good to go. I certainly haven't heard of any Demeter equipment being riddled with lifelong problems or defects. | 
