As the seller says, if he asks for compensation for a lost item from RM he will only get his cost price for it - if the buyer claims he will get refunded the cost at auction end, there is a special box for ebay auction numbers so they can verify. It is really up to you, if the seller is a nice guy and you feel like helping out (after he has provided proof of postage) then fair enough, fill in the claim yourself. If he isnt and starts procrastinating then get ebays complaints dept in there as soon as possible.
Personally though, I steer clear of people who put these sort of condition on their listings in bold italics, also a seller that claims he has "a number of lost items recently" - just plain no - the two main reasons why parcels dont get where they are going - badly wrapped - wrongly addressed