This is an excellent (and unfortunately typical) example of why Sears deserves to go under.
Except this really isn't typical.
It's far more typical that an online order for shipment results in a cancellation due to sellout than an online order for store pickup.
This particular out-of-stock issue is unfortunate, but not unexpected when dealing with Black Friday - the store doesn't have seperate inventories.
The customer never should have received a "Your order is ready for pickup!" email, as the store employees have to go to the floor and grab the item in a lot of cases, then put it in a bin and mark the order ready, so the system is flagged to send the pickup email. If he did get the email, it's entirely possible that they flagged it before picking, and then found the items out of stock, but that's not a regular occurrence.
As to refunds/credits, well, this is a problem that virtually every online retailer suffers from, and is commonly more of an issue with the credit card companies than the stores. It's ridiculous that your money can be taken instantly from your card/balance, but it takes days or weeks for authorizations to fall off, credits/refunds to be applied, etc.
It's my sincere hope that existing alternate payment methods (Dwolla, perhaps?) succeed and expand, and more methods sprout up. Anything that makes the banks feel the hurt so that they fix all of their glaring customer service issues.