There is no way anyone can have an exchange and not know that paypal should not be mixed with bitcoin.
I say a horrible attempt at an exchange, scam or otherwise.
See my edited post, also, since the actual transactions occur between users, I doubt they would make much scamming anyone.
Also, I would consider this less of typical BTC-USD exchange, but more of an escrow service that considers Bitcoin as a/the currency and PPUSD as a commodity.