I would ask for the item first then reverse the feedback. You contact customer support at the top of the Ebay page and put that question in. What they are doing is called extortion and you can report this to Ebay and they may lose their privileges. I would even call Ebay to complain and ask for help.
What you could do is request to cancel the transaction and request a refund. Do not give
them $10 more. Whatever course of action you take, Ebay will side with you if you open a case because they always side with buyers.
It is not their fault that the item was lost. However, if your item was sent via Priority Mail, it is automatically insured for up to $50.The seller needs to file a claim with USPS, AND therefor refund your money. Do NOT remove feedback just based on them saying they will ship another item for free. I seriously doubt that they will ship anything. Tracking clearly shows USPS screwed up.
As for ebay itself. You can contact c.s. to remove biased retaliatory feedback against you (which this was), or remove feedback left for others. Also, what you should do, if it isn't too late, is to file a complaint with ebay... especially if your item was sent Priority Mail (or that you paid for PM), and show that the seller would be refunded and therefor should refund your money.
You don't have to pay anything, go open a case on them and either they send you a new one for free, or refund your money, leave the negative feedback so other buyers don't have to deal with sellers like this one
What you do is file a dispute for an item not received. This will get your money back. You are not responsible for the mail. The seller is responsible for getting the item to you in the stated condition without asking for more money. Don't listen to their crap.