I think the thing with Paypal, especially since they are bought out by Ebay now, they are monopolizing the business and so can do anything cos they know Ebay users don't have many alternatives that are widely accepted by sellers and buyers alike.
I have had my accounts suspended TWICE for suspicious activity, one cos when I was over in Singapore visiting, I logged in to check my balance and it detected an "out of country log in attempt" and suspended it...I had a few hundred bucks locked in for a few months before they released it after I faxed over my life (ss card, passport, driver's license, itenary) to them...
The 2nd time the SAME account got suspended was when some ebayer paid me via fraudulent funds...his account was suspended, but while I already sent the goods, mine got suspended too..so I was out $190 and the mobo/cpu combo...
Paypal has several websites dedicated to their demise, they're just big enough not to care
Bidpay.com is actually pretty good, just not "instantaneous" like paypal, and costs a little more..
BTW while Paypal has a system in place to flag possible fraudulent deals, like deals over $500 or if a seller receives more than $1500 in a month (based on history) etc etc Paypal has someone to look over those deals instead of the system approving it...this person is the reason behind many "unexplained" suspensions or reversal of funds etc.
However, a friend of mine's friend worked for Paypal and quit about a year ago, said Paypal (after Ebay bought them out) was going through LOTS of scams with fraudulent credit card's for tens of thousands, and the Paypal administrators (the people who were supposed to look at the deals) were IN ON IT! None of this info is public because it would hurt their IPO if people heard thousands were scamming Paypal...