Um, so he's saying he's going to take you to the cops under the bad check statute? That's wouldn't really apply here (I presume you got verbal agreement from him before canceling the check? You have some record that you did in fact give him that second set of money for it?

As far as whether you should have eaten the cost or not, it all depends. Was this an as-is sale? Were there representations made as to its condition that turned out to be false? At any rate, he could have taken it back in the first place. I'd maybe tell him you'll give him a bit more (let's say what you originally paid minus one-half the cost of repair) and leave it there. I don't see why you'd really have to, but if it gets him off your back isn't it worth it?