I basically live by OCN, but I know those mods, and if one of them tipped PayPal off I'm gonna be really mad. There was a huge thread about it with like 3000 replies on OCN.
What would OCN tell Paypal that would make them shut down CoinPal? Bitcoins are goods traded by users for money and other services, so I don't see what Paypal can really do about this business. I'm don't know a lot about how the financial world works, but Bitcoins aren't "an actual currency", just virtual points that people buy/sell for real money.
PayPal, owned by eBay, is in the middle of their third class-action for defrauding customers and freezing accounts.
Regardless of whether or not the department that gave you permission to trade BitCoins was authorized to, you have their permission. In commerce law, this is referred to as "principal and agent". The agent (say a teller at a bank) is understood to represent the principal (the bank manager) and vice-versa. If they misrepresent, it's the bank that must keep its word to you - not you that must be inconvenienced by the bank. Same goes here.
As for "This limitation cannot be appealed", they mean within PayPal's internal faux-court. In PayPal's EULA, there is a proviso which requires you to agree that, in the event of a dispute with PayPal, you agree to forfeit your access to a real court and must instead seek remedy exclusively through a hearing comprised of PayPal staff. In 1992 a real court ruled that PayPal couldn't include that proviso, because it fraudulently convinced Paypal users that they had no access to real courts as a result. Last I checked a few months ago, the proviso was still in PayPal's EULA despite the court ruling.
You have a strong case, and PayPal has left itself wide open in its flagrantly abusive practices. You might come out of this financially ahead given punitive damages, and what's more a lawsuit against PayPal would be effective material for a press release. News coverage would certainly be free advertising, and in this case such a venture would actually make it advertising that paid you instead.
Submitted for your consideration. Be well.
This might be the greatest post I've ever read.