IANAL, but this is the way it looks to me...
The buyer and seller entered into a contract where the buyer agrees to pay $700 and the seller agrees to deliver a new speaker cabinet of a specified model '212PL' to the buyer. The seller contracted with the delivery firm to arrange shipping, to meet the seller's obligation to the buyer to deliver the speaker. Both the buyer and the seller agreed to have another contract for transferring the money (PayPal), and both agreed to terms that have specific terms related to that transfer. In this case, the terms do not offer recourse to the buyer via PayPal.
The buyer met their obligation to submit payment. The payment agent met their obligation to deliver the funds. The seller met their obligation to arrange for shipment. So far so good.
As it turns out, the cabinet was apparently damaged during shipping. Either the seller was negligent in packing it, or the shipping company was negligent in handling it, but which of those is the case is between the seller and the shipping company. The buyer should not be burdened with dealing with this problem because it is the seller's responsibility to deliver the speaker.
Upon receipt of the cabinet, the buyer noticed that the cabinet was damaged, and contacted the seller, and even provided a photo as evidence of the damage. At this point, the buyer has met their obligation to pay, and the seller still has not delivered a speaker model '212PL' in new condition, but the original contract to exchange payment for a delivered speaker still applies. If there are explicit conditions in the contract that account for another outcome, they will be relevant, but it appears that these details were not explicitly discussed. The seller points to their website as stating there are no refunds for discounted items, but regardless of that, I don't see a reason at this point why the buyer could unilaterally end the contract.
Upon hearing that their obligation to deliver the cabinet was not yet met, it appears that he seller 1) shipped a new "upgraded" cabinet, and 2) arranged for FedEx to pick up the damaged cabinet. It also appears that the seller is taking responsibility for working with the shipping company to solve the problem of the damages. This is consistent with their obligation under the contract.
At this point, it appears that he seller is still working to meet their end of the contract. Sending an "upgraded" cabinet introduces a wrinkle, however. If the item they sent were materially different, it would no longer be sufficient to meet their obligation under the contract. In this case, however, the contract was for a particular model '212PL', and in spite of the fact that they almost certainly agreed on the lower wattage version, I don't think it voids the contract for the seller to have delivered the higher wattage version with the same model designation. If it can be shown that the contract were for a particular version, then that might be different. But based on what I saw in the email chain, I don't see any mention of a particular version, just the model number. I think the seller is still meeting their obligation under the contract with the buyer.
So given the particulars as presented so far, I don't see that the buyer has a case for why they should be allowed out of the contract, unless the seller also agrees (and the email shows that they do not).
Alternately...
Other sellers offer certain terms about refunds for items they sell. If a buyer prefers those terms, those sellers are happy to make the sale. I don't see that as relevant in this particular case.
If the buyer and seller had agreed to a different method of payment, i.e. PayPal transaction with fees, and associated rights for refunds, I think those terms would also apply to this transaction. But they didn't, so I also don't see that as relevant in this particular case.