You can dispute the charge with your credit card company. In fact, I recommend that over Paypal's system. Paypal isn't very helpful when the item is sent by the seller, so you'll have better luck with the credit card company.

The item they sent you did not work without the software, so you refused delivery. The seller has the item, you need a refund for that item. I don't think they'll give you any trouble. If you tried to keep it, that would be a different story.

I do think that eventually URC will post a non-updatable version of the 980 software on their site, but it is very new and they haven't done it yet.

Sean