If I am following your scenario right, I would think, reasonably, you could hold Party E and possibly G, if you figure that the auction site has a responsibility to police the auctions for such auctions. In fact, eBay does prohibit certain kinds of auctions that could have potential for fraud or tastelessness that would lead to other offensive content. That might indicate that they acknowlege some responsibility. Considering the nature of eBay though and how it is a, sort of, self service, service. Unlike a regular auction house where they have more contact with the merchandise and the cataloging of it etc... and more control of such matters, I would think eBay would have enough distance to be reasonably innocent. However, if FedEX KINKOS can be held responsible for you photocopying something on one of their copiers than eBay could, maybe, have some liability in a matter like this.

Party A, didn't represent it as anything, marked it down due to it's damage...

Party B. bought it for their own use and donated it to charity when they were tired of it. Again with no represtnation of similarity or anything. Party C, only repaired it for Party B. and was never involved in the trade of the blouse. Party D., the charity, held it for a while making no representations of anything. Party E. is the first person to make any connection and representation that it was connected in some way with the princesses death. Personally, I would say solely responsible. Party F. published a photo and never made any representation of connection with the blouse. In fact, Party F, could sue party E for publishing their photo, (Copyright Material) in an auction without permission. Party G., as I mentioned may have some responsibility for policing the auctions on their site. Party H is the plaintiff of the suit or the injured party.

???