As long as you pay with Paypal, you're covered should the seller choose not to follow through. The burden is on the seller to provide proof that he "shipped" the item in question.
I've never been a big fan of selling domains using Paypal tbh -- and I'm sure some of you have seen one of my many rants on here about it. I was the victim of a similar scam (nothing to do with LLLL.coms though) in December of 2006 and am surprised at how little Paypal did to investigate the situation or even give me the time of day to tell my side of the story... They're clearly focussed on being "Buyer Safe" rather than "Transaction Safe" like Escrow.com would be...
I never do any transactions through Paypal with people who send emails to my whois listed email address. I'm very cautious about even doing Paypal transactions with newer Namepros members or members with little feedback. You can never be too safe... That $25 escrow fee is really worth the peace of mind... I do every transaction over $500 via escrow except when I have a good relationship with the buyer.