Craigslist transaction went south...

Sorry to hear of your bad experience. I have not used CL much for 'gear'..but mostly old furniture, vacuum cleaners, etc. 
But did sell 2 older but well working TVs with no hassles at all.

Funny thing about CL the safest deals usually involve the most money, cars & trucks. In most cases once they agree to buy the car, you can do title changes and money transfers inside your local bank in front of witnesses. 

You do have more protection selling on ebay. You can even click the square that says, "Local Delivery Accepted". That's where I sell most of my cheaper electronics. You do have to deal with fees, etc. but if you plan well can do well.  I've purchased some nice things too. Of course, Audiogon and US Audio Mart are other options with low overheads. 

Cash and carry. Good for you! this guy (tire kicker) needs to realize these things are sold as is no warranty and for $120 good luck finding a lawyer for less than a $1000 too take up his lost cause! You did the right thing collecting the money and not letting him pay with a CC or Paypal. He has no leg to stand on!  I would not loose any sleep over this "wanna try it and return it guy" Heck with that!

What really made me angry was he started with taking legal action. He could have just told the receiver is not working and I would have given his money back no question asked. 

A good lesson in why letting buyers come to your house in a bad idea. Imagine if he knew where you live?! One advisable idea with local sales is to allow the buyer to audition the component in his system, to insure it is operating to his satisfaction. After that, he is on his own.

...and then there's the idiots 'out there' that don't know how to operate audio gear that's more complex than a clock radio.  And even then, some clock radios' need the manual to make them work properly...

Case in point:  I've provided a 'shop stereo' with a receiver with a CD player, a parametric EQ, and a pair of 'line source' speaker arrays that can drown out the saws in the space.

Employ sez: "CD don't work."  Really?  OK, I'll check it out....

Later, walk up, switch on, punch ONE button on the EQ (which I've pointed out previously)....*foom* CD works....

Give the AH his $ back.  Find the manual (online?) and sell it again.  Some people can hurt themselves with a plastic butter knife and will sue the manufacturer of the knife for not providing a 'use manual'....

CYA is the order of the day.