Avoid the temptation to appease the customer just to avoid an argument with him. If a customer is completely in the wrong, you have to draw the line somewhere. I used to satisfy every ridiculous customer request just to avoid a negative feedback or to avoid having an uncomfortable conversation with them. Returns are a big cost in retail and eventually you have to stand your grounds.
A good middle-ground solution might be to allow him to return the item, minus freight costs, and with a 25%-35% restocking fee. Sometimes people just want to save face, and this gives him an out.