I think that's far too broad a generalization. It's possible to get royally ripped off by a local seller, and it's also possible for some folks to get exactly what they're looking for at acceptable prices on eBay. It all depends on the details.

Yes, it can be harder to evaluate a vehicle from a long distance, but not necessarily impossible. Again, it all depends on the particulars. A thorough PPI from a recommended indy mechanic might be arranged from a distance, and I'd put more stock in that than I would in a cursory in-person tire kicking session.

It's fine as long as one spends his money based on what he can find out about the vehicle and how averse he is to risk - and that applies to any transaction, no matter where the car is located.

I don't normally shop for cars on eBay, but if I were looking for a particular combination of make, model, condition, etc., I would recognize the simple fact that I might die of old age before the right car turned up locally.
I strongly disagree. If I were selling a "commodity" car - readily available almost anywhere - then I'd sell it locally. Nobody's going to want to travel 500 miles to pick up a garden variety car at market price.

If I had something special, however - something where the equivalent can't simply be picked up anywhere, anytime - then I'd seriously consider the much larger pool of prospective buyers that might be available to me by advertising the car on eBay, AutoTrader, etc. I'd have to weigh the prospects of a much higher sale price against the possibility of hassles with long-distance dealing, prank bidders, flakes, etc.
It's fine with me if you want to bust on bogus sellers. I do it myself on occasion. That's far more productive, IMHO, than tarring all sellers with the same brush.