Hello
Quotevirtuemart 2.0.10
Hum... yes it was not handled correctly because at that time there was no difference between partial refund, and refund.
In newer version some improvments have been done.
The refund or partial refund is done in Paypal, which sends a IPN to VM. VM updates the order status according to the payment configuration.
You have to create a new order status.
If you cannot update the full virtuemart, you can may be take the paypal plugin code from the latest stable version, and test if this will solve your stock problem.
The paypal plugin
should be compatible with VM2.0.10. Please test it first.