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PayPal has tightened up there account set up restrictions. It's not as easy as it was a few years ago. Now that they are owned by ebay, who knows.
Re: Your "expanded use number" perhaps this is the 3 digit number on the back of your CC? This is a new one for me if it is indeed 4 digits. The only other weirdo number I know about is the bank routing number that you can find on your checks.
I only sell and buy on ebay through PayPal. I never had a problem but I know of others who have been frustrated just like you. The bank that isn't a bank (or FDIC insured) that basically has unlimited access to whatever account you give them to draw funds from. There are some real horror stories out there.
My advice like that of a few others is use a money order.
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