Hmmm... I'll have to investigate this... In the meantime, can you just include the difference in the box (in cash in an envelope) with a note explaining that it overcharged them and that, as a good seller, you're returning the difference?
I got a check back from a magazine once (after it shut down) for the remainder of the issues I'd paid for and I was truly impressed by their honesty. Unfortunately they no longer had a magazine for me to subscribe to or I'd have renewed my subscription on that basis alone...(Well, that and I liked their magazine.)
It is most likely NOT etsy but the way you have your paypal set up. This happened to me once and it was a problem with my paypal. I had some old shipping amounts saved in there and it would override the Etsy amounts. You can make a refund with paypal and it will not charge you to do so. It even adjust the fee they originally charged you to the lower amount. I would also suggest you contact support@etsy.com. Good luck!