Ok, saw your reply. Now I would go to "the other end of things" and contact your credit card. See what they have to say about this scenario. You credit card company will know what the banking law is about any discretionary latitude there might be regarding how a credit card transaction refund can be issued.
I have experienced something similar in stores, but only with small dollar amounts, where the store pays me out cash for a refund rather than issuing a credit back to the card. But when you are in this rather odd mix of it being a mail order transaction, and PayPal - as the intermediary - only had *one* method on file to issue a refund at the time of the original transaction, PayPal might not be allowed to impose a change after the fact.
You may have to simply dispute the PayPal charge on your credit card, for a rather obvious, yet kinda weird reason in your case. When I disputed a PP charge before - for receiving blatantly falsely described crap on an eBay transaction that the seller refused to accept for return - I got a finger wagging e-mail from PP, but they didn't close my account. And I got the credit processed back to my card.
The other PITA thing to do would be to read the god-awful "terms & conditions" for your PP account.
