Sigh... it seems PayPal support is behind the news... I finally have a reply from them regardless that the problem has been resolved.
I will post the reply here because I find it amusing in some strange way. Maybe in another 48 hours I'll have some sort of official answer?
Dear Edward O'Rourke,
Thank you for contacting PayPal. I understand that the shipping charge is not being added to the price being paid by your customer when they make a purchase on your website.
My sincere apologies for the inconvenience that the initial response you received was not able to address your concern.
Kindly be advised that I created a ticket regarding your concern and sent it to our Merchant Technical Support Team for further investigation. The ticket reference number is 141010-000379. Kindly allow 24 to 48 hours for this issue to be investigated. You will receive an email response from our Merchant Technical Support Team regarding any update about the issue.
I humbly ask for your extended patience and understanding.
We value you as part of the PayPal family. Should you need further assistance, please feel free to email us or call us at 402-935-2050 or 888-221-1161 during these hours:
4:00 AM PT to 10:00 PM PT, Monday–Friday
6:00 AM PT to 8:00 PM PT, Saturday and Sunday
Thank you for choosing PayPal, the safest, easiest way to send and receive payments online.Sincerely,
Kelvin
PayPal Customer Solutions
PayPal, an eBay Company