Guys,
All the above suggested method may be able to lessen the risk of chargeback, but cant prevent what happened to my account.
In my case, there was no chargeback, but paypal itself decided to review certain transactions (may be because I did lot of trades, involving $$).
So really, there is no way to mitigate your paypal risk I guess....
Agreed, we can solve the Paypal transaction failings with some more hoops, but I'm still plagued by the feasibility of it based on the Paypal terms of service.
It states you can't trade 'securities', and a security wikipedia says is a 'negotiable financial instrument representing financial value'. The act of selling it for fiat currency instantly makes it a security I guess.
Evidently, it would be mandatory that no transaction mentions bitcoins in the description - and that unfortunately can only be by user discretion. I'm sure some nefarious sad case number cruncher in the Paypal offices is proudly presenting their boss with their latest creation, the "all transactions mentioning bit* or BTC in the description" report.
Besides that, it seems that chargeback claims draw attention and perhaps multiple small transactions over short time periods? Two more things I can't see a way around.
As difficult as it will make my bitcoin life, I'm convinced enough from what I've read in this thread to dump Paypal forever. I consider it too high a risk for me as a seller, regardless of any external safety mechanisms - Paypal hold all the cards, so I'm moving to a different table. I suspect I'll have to change tables a few more times in the future too!