Write the letter ... but consider a lawyer at some point
A carefully crafted letter can go a long way in ending this. For the $150/$200, cut your losses and sit down and get it drafted - ask yourself how much time, effort & suffering is this worth in dealing with it yourself?
Don't take this the wrong way - run spell check on your letter. Really, if this other guy is a complete rip-off but comes across with a better statement of facts than you, carefully laid out in his favor, you could be in for a longer uphill battle.
When you do write it, come back in an hour, re-read it and get a third party to read it. You know the facts, the credit card company and their representative know absolutely nothing about the previous owner, the documentation trail, e-bay records, signatures, etc. Once they've read if and the nightmare doesn't end, you've got your letter to take to the attorney.
My two cents - good luck!