Feeling kinda dumb

I've been Ebaying now for something like ten years. In that whole time I've always had good experiences with both buying and selling items. Everything that I bought always arrived as described, I am a careful and conscientious seller, and I have perfect feedback.
Then last week I bought a dress for the new baby. The woman had a good feedback score and she described the dress as having no rips, tears, or stains of any kind. She did note that since she buys and resells baby clothes, she can't always be sure they come from a smoke free home, but she launders them all first just in case.
Um.
Yeah, here's where things got all wonky and I ended up feeling stupid.
I won the auction, paid for the dress, and then it didn't ship right away like she said it would in her Ebay ad. This led me to start reading all her feedback as I began to get that nervous feeling in the pit of my stomach. Her bad feedback all said the same things - item not as described, came with stains on it, had tears, smelled terribly of smoke...etc.
Her good feedback even had quite a few people that complained of a very strong cigarette odor.
Now I really started to get nervous, but I was trying to remain positive.
The dress arrived today and you could smell cigarette smoke ALL OVER the shipping bag. (it was one of those thin, plasticky expedited shipping bags, not a paper shipping envelope) Then when I opened the bag, the smell of cigarettes was so bad my eyes watered. T.G.'s description of how the dress smelled was "Ew! It's like she wiped it on a bar floor!"
Personally I thought it smelled more like she used it to clean ashtrays, but as I didn't have a panel of experts on hand I can't tell you for sure who was right. What I can tell you is that I strongly suspect the woman herself is the smoker, and the comment she made about the dress possibly being from a non-smoke free home was baloney. T.G. suspected that too, especially since the outside of the bag and shipping label both REEKED of smoke. If that was where the problems ended I would have just dealt with it. There are ways to get cigarette stench out of clothes, and I would have just employed them. But that wasn't where the problems ended.
Clearly visible on the front of the dress were yellow stains. They were all over. An inspection of the back of the dress was no better. It had even bigger stains. It was hardly in the condition the woman advertised it as being in. Not only that, but it appeared she was aware of the stains and had tried to do something about them, because there was either stain remover or detergent residue on the front of the dress. The residue was so thick in parts that the fabric was stiff, sticky, and somewhat bluish in color. Now this is all supposition, but she's the one who says she launders stuff before she sends it out. My guess is that she coated it in tide or some similar blue colored detergent, let it sit for a few hours, and then gave it a swirl around in the washing machine or the sink. The reason why it smelled like smoke so badly is because she's the smoker. Otherwise why would the outside of the bag and the label be coated in cigarette smell? And why would a laundered dress stink of an ashtray? Pft. I'm not buying her story about possible previous owners who smoked. Someone had smoked around that dress and envelope recently, and I don't claim to be Sherlock Holmes, but I'd be willing to bet on her being the culprit.
The end result of this was me feeling all deflated and dumb. T.G. was indignant for me, but all I could think was that I had bought this wrecked dress and it was so embarrassing. I've never run into an unethical seller on Ebay before, the experience sort of squashed me flat.
So I emailed her and told her about the stains. I requested a full refund and told her that I would be happy to return the dress if she prepaid the shipping charges. She did not email me back, but did refund my total cost.
Now I'm bit confused. Do I keep the dress? Do I look into how much it would be to ship it back and email her with that cost and ask if she wants me to return it? She didn't answer the previous email, just refunded the money and her account says she does not do returns, but I feel weird keeping a dress that has been refunded.
Ugh the whole experience is really leaving a bad taste in my mouth. I'm all...blargh.