Richard, I'm no expert on guitars, but I know enough to be able to follow this discussion. It seems to me that the seller in this case did not represent himself as a luthier or an expert in evaluating the instrument. When he said, "There is some slight rippling to the neck but I would say that it is straight enough," and also tells you the intonation is off...that to me would be enough of a red flag to leave this turkey alone, unless you could get it for a song. Yes, it's quite possible that the guy knew this was a lemon, and was hoping he could foist it off on someone who wouldn't know the difference. But he didn't claim it was in great shape, and he told you about two big flaws that to me would suggest the presence of others. It doesn't sound like he did anything that would reach the realm of fraud...though I'm not a lawyer, either.

I understand your frustration, and I'm sorry you had such a bad experience.   

Aloha,
Mark