I'm very sorry about what PayPal did to you. They just did the same thing to me last week. It's actually something they've been doing since last year (May 2003, I think), but apparently they're being more active and even more asinine than usual.
I tell you, it's bad enough that they decide that perfectly clean and harmless websites are unworthy of their services, they make it even worse by shutting you down without advance warning, and then they freeze your money for 180 days. Outrageous. They're not even bothering to answer my very polite and reasonable request for more info about the specific reasons for closing my account, even though I emailed them three times at the address they provide in the account closing announcement email they send, and they also ignored a direct internal request sent to them by one of their own agents that I was able to talk to and who was kind enough to get advice from her supervisor and ask the people in charge of the decision to call me (you can't call them). I didn't expect much, but it seems to me that giving a bit more feedback is the least they could do, even if it's a negative answer. Of course, they don't give a crap.
Anyway, I just wanted to let you know that I understand how frustrating such a situation can be. As a vendor, I used to like PayPal well enough because they offer a very good deal to sellers (they keep a very small percentage of each transaction), but now I'm totally disgusted with their customer service. They're totally unfair and their policies border on the illegal.
If only PayPal hadn't been consumed by eBay... PayPal doesn't have a very good reputation overall, but it's really eBay that's responsible for this extreme anti-adult nonesense. What's even more frustrating is that they're just fine with Playboy, Playgirl and Penthouse (there's something on their website that mentions these publications as exceptions). Such absurd discrimination...
I'll give them one thing, though. I was able to talk to three different agents, and they were all very kind and as helpful as they could be, considering their limited power. It's the people in charge that are the problem. And most definitely eBay.