One possible compromise would be to accept it back, refund their 50%, and try to sell/auction the item to someone else. If the item is purchased for more than 50% of the original price, you could then refund the first customer the overage.

For example:
Original price: $30
Refund: $15
New purchase price: $25
Send first customer back $10
You retained $15 of original payment, plus $15 from new purchase payment, thus making the original $30 you charged.
Original customer gets $25 of their $30 back. (Or more, if new purchase price is higher.)

And if the new purchase is over $30, you could either keep it, or split it with the original customer to cover shipping charges.

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Of course, this is all just to make the original customer happier. According to the TOS (I assume) they agreed to, you really only owe them the 50% back.