George, try this out and see if it helps. Go to your real PayPal account. Under the little head icon is a Profile and Settings menu. Click that.
There are three columns. On the right is Selling Preferences. Click Instant Payment Notification Preferences and you'll be given an IPN setup screen. Set Receive IPN Notifications and paste in your IPN URL from the SD settings page.
Let me know if that gets you further along in the process.
--David