I'm sure you've thought of this, but it sounds to me like you should sue Paypal for everything they took from you, plus all the additional damages you've suffered (entire loss of your business), and probably lawyer's fees too. You may even be able to tack some kind of statutory damages on top too.
After all the time and money it takes to bring suit and win you still have to hound the defendant to get paid. The only recourse to not getting paid is to sue.
Karl's version of Parkinson's Law: Work expands to exceed the time alloted it.