Thanks Ellahjay88 and the rest of you guys. So there was some drama at the end of the auction, here's what happened: I go to cancel guy Y's bid, with an explanation that he doesn't have enough feedback (remember, I put it in my terms of the auction in the text of the listing that I reserve the right to cancel any bids with negative or low feedback). Then a few seconds later, he rebids! So I waited until right close to the end of the auction (about 15 seconds left to go) and then cancelled his bid again with the same explanation. Guess what, he rebid again (this would be his third time bidding on my item). Luckily, he was outbid in the last few seconds by a brand new bidder, who has great feedback, is a verified paypal user, and has actually already paid very promptly.
I still have no idea what guy Y's problem was. Didn't he get that I didn't want to sell to him/her? Even if there wasn't anything shady going on, I am fairly sure I would have had some kind of problem if the auction closed with him as the high bidder and I had been bound by ebay rules as a seller. Don't have anything else to put on auction for a while, but wondering if there are any other steps I can take to prevent this happening again in future if I decide to sell again. What a weird, and troublesome experience.