On the contrary. I don't want to fan the flames of conspiracy theories... but there is a very real possibility that if the market went _up_, Coinbase would have refunded the money as USD instead of BTC.

Only if Coinbase can prove to the public that they are consistent on matters like this would your assertion be correct. But if Coinbase were inconsistently applying their policies... they can make a very pretty penny on scamming their customers.

Transaction Delays are a serious problem.

Now, according to the edit, Coinbase did the right thing here and are eating the loss. So Coinbase is doing a good job at damage control...