Neither the bitcointalk poster nor Paypal's CEO were lying, although the poster's conclusion is now proven to be incorrect. The OP was selling casascius coins,

Neither the bitcointalk poster nor Paypal's CEO were lying, although the poster's conclusion is now proven to be incorrect. The OP was selling casascius coins, which contain bitcoin private keys (digital currency) and are therefore against the terms of service. The CS rep the OP talked to incorrectly communicated that ALL bitcoin related items were banned. Later Paypal and their CEO issued a statement clarifying that only digital currencies themselves were banned.