My opinion has changed and I'm settling in the middle. Both parties have valid reasoning and I have come down to say that:
1. Packaging should have been better. People skimp out on shipping material because they're going to have to pay more out of their pocket and lose money, there is a solution to that, include it as part of the shipping price, there is nothing wrong with that. Simply defined, shipping costs are the costs involved to ship an item, well the box, materials used are all part of shipping costs. Personally, I rarely change because 1) I know how it is to have to pay more and 2) I go to a box store and see if they have any boxes or shipping material I can take since they are going to throw them away and they never turn me down.
My next alternative is Wal-Mart. Boxes are no more than $1.50 - $2 and you can get foam noodles for the pool for $1.50 each (don't buy the thick ones since those are nearly $4 and you can get 2 of the thinner ones (still plenty sufficient) and it's cheaper and it's more cushion. There's a variety of methods to package things, it all depends on what you're shipping. To support the bottom, a couple layers of cardboard is a good idea, even on the top might be a good idea. The foam noodles really help. THICK brown paper crumbled up to fill crevices helps as well. Packing peanuts help if you need to fill up several inches of space. Air bubbles are not sufficient. It's up to the SELLER to make sure they package their items well and if you want security, take pictures of steps you took during shipping so in a situation like this you have pictures to prove it was not the shipping companies fault. A final and effective method is to double box. Find a box that is almost exactly the same size as what you are shipping, but the item in there, and then package that box into another box.
2. The buyer should be more cooperative in this case. The seller has made attempts to work things out and not many people would offer to pay for half the cost. I do not know who should be contacting the shipping company for an insurance claim, I always that it was the seller's duty, but it may be different. Never been there, don't know.
3. Realize this sorta of stuff ruin's one reputation, regardless of whether or not everything is solved.
Again, both parties could have done better on their ends. Simply put, if you want to make it work out, do it.