If I simply set the Payment Options to Test, select PayPal, and enter the e-mail for a business/merchant account that I have set up in a PayPal Developer Sandbox account, then have a "person" using the e-mail of a buyer account that I have set up in the Sandbox try to register and pay for an event using PayPal, I get:
Bad Request
Your browser sent a request that this server could not understand.
Size of a request header field exceeds server limit.
I see the IPN test capabilities of the sandbox and set the IPN handler URL to the URL of the site, but it is in the Sandbox's "IPN Simulator" rather than a setting.
Maybe your event registration cost is less than one whole dollar[/euro/pound]? I found that if I charged USD 0.99 or less for an event, the paypal system got upset. Lots of details of my issue at:
This thread is a year and a half old. There are no known issues with PayPal in the current versions. If you are using an older version, get updated. If you do have the latest and have PayPal issues... it's almost positively going to be setup related. You can follow that through with plenty of details in a ticket.