Ah, ok, I will try to help, Mo, but this is a tricky one.
Well your seller is correct in that it will take a while for the Post Office to issue a refund. IMO a professional seller would refund you first and wait for the Post Office to refund him later, but maybe he is not sure whether to believe your claim (people do try it on) or genuinely has not got the cash to refund you.
Again IMO a professional seller would pursue the claim for you, although you would also have to fill in a form to state you didn't receive the goods. Both of you need to co-operate on this, the Post Office will not act otherwise. He should be doing the paperwork IMO but if he won't then start the claim yourself and ask him to co-operate when the PO contact him.
You are shafter as far as feedback goes but here's hoping your seller will still make good. Treat him as if he is an honest person who is going to do the right thing, and hopefully he will respond well. Threatening or insulting emails don't usually get a good response, if you see what I mean, so even if you are livid with him, remain polite and business-like
Did you track the number with the PO? Was it a genuine tracking number? You can check this online at the royal mail website.
I hope this helps. IMO you may well get your money back, but just be patient and keep on good terms with the seller. Best of luck.