I think this is a simple case of someone not understanding eBay at all. He didn't do any research, and won't sell a thing. He probably figures he is offering a deal because someone somewhere once paid more than that for something similar.
As for buying from someone with zero feedback, I would as long as the entire transaction is covered by PayPal protection. I have found good deals this way, since other people are hesitant to bid too much. You just have to be careful to read everything carefully, examine pictures closely, and expect the condition descriptions to be overly generous.