I'll play. I'm not against trading with newbies, though of course a "known entity" is a nice luxury. On the other hand, the only time I've been "burned" was when I trusted a user on another forum and sent a set of MWG scope rings before I received the check. The rings had been on a shelf unused for more than a year. He dropped out of sight, and I've never seen his username again. I actually doubt he skipped on purpose, as he PM'd me a couple of times saying he'd lost my address, but I didn't catch his PM's until way after he'd been gone. Sixgunsmith45, if you're out there, I'd appreciate the contact.
When I buy, I try to get any references for the seller I can find--EBay feedback, forum testimonies from other buyers, etc. For big money transactions, I'll post a thread, "Ever buy from John Doe?" and usually, I'll get a reply. I'll get an address, of course, and a phone number; I try to confirm the existence of the seller by checking "People Search" on Yahoo, and any other white pages search engines I have.
Without exception, I send either a bank draft, bank money order, personal check, or certified check. If something goes awry, I can get my bank to track back to the account the seller used. (I never use personal checks with an unknown party for a transaction in my state; he could walk into one of my bank's branches and all he'd need is a photo ID.) This practice isn't infallable of course, but it hasn't failed so far. I never use postal money orders, and will not enter into a deal that insists on it. They can't be canceled, and the USPS doesn't require anymore than a credit card (at least, some clerks will take that as ID).
I send the funds by USPS Registered Mail if I'm dealing with an unknown party or high-dollar transaction; it requires an ID and a signature, and the clerk releasing my mailed funds is accountable for taking a "bona fide" ID (as good as that can be expected) with a corresponding address. Registered Mail theft and mail fraud is considered pretty serious by the postal inspectors. I've only had to sic the inspectors on a seller once, and I got satisfactory results in 3 weeks. I was amazed at the speed. Incidentally, Registered Mail is agonizingly slow; every time the letter is moved within the USPS system, someone has to sign for it--that's actually a good thing--it's never 'lost'. I'll ship a scanned copy of my mail and fund receipts to the seller by email (with the postal clerk's ETA) to prove that payment was sent, and might take an extra few days. No one's ever complained about my method.
So far, the only fouls I've suffered is the one described in the first paragraph, which I really consider unintentional, and a blatant ripoff (DVD purchase) out of Canada (I'll never deal out of the US again).
By the way, a real low-ball price is not always an indication of shadiness. I cite three purchases:
unfired Ed Brown Kobra Carry, $1200
Nightforce NXS 5.5-22x56 $750
Leica 77 angled 20-60x scope $700
These prices are real lowball prices for those who may not know; in each case, I was never able to get references, because they were 'newbies' to a forum or auction site. Two had 'confirmable' addresses through "People Search"; in one case, I confirmed the user's address through Google--it linked his name to his high school reunion 9years prior (he wasn't listed in the white pages). For the rest, I think my procedures held me in good stead.
I hope others can use my experiences.