Today I got a book I had on my WL, one only I was wishing for. Once I got the book out of the envelope, I noticed the front cover was seperated from the binding for about three fourths of an inch. I wasn't sure if this made it unpostable, and was about to ask here. A further examination found that the binding was broken and the first twenty or so pages are seperated from the binding itself for the same length. I was sure this was not postable, and asked the sender about refunding the credit. They said the book was fine when they mailed it and it must have been damaged by the post office. If that's the case I don't want to bug the sender further, but how likely is that?

More likely than you may think. It's been hot, and it's possible that the glue cracked or softened. They're also not always gentle with packages.

It's up to you if you want to believe the sender or not, but if they stick to their guns and refuse to return the credit there's not much you can do.

I'd personally be inclined to give them the benefit of the doubt, mark it as damaged by the post office, and let it go. You won't get your credit back, but you'll  go back on the WL for the next available copy.