Doesn't sound like a Bait and Switch but the dealer could be in for a world of trouble I think-if the guy wanted to push the issue. I have sold two cars on E-bay and bought two more so I am somewhat familiar with E-bay and E-bay motors.
Obviously the dealer screwed up and didn't put a reserve price on the car. I am guessing that once he realized that the car would go for a lot less than what it was worth he tried weasling out of it. However, like others have said, his 'bail out clause' stated he could cancell for negative feedback, if it sells early or anytime before the end of sale. This technically is a legal binding contract and if the guy wanted to sue over it I am willing to bet he could get the car for the price, plus some money for his hassle.
I don't know if I would get into a whizzing contest for the car but I suppose others might. I myself, when I post a car for sale specifically make sure that the car is listed with a reserve price and specify what I will and will not do.