Rob and I have had this discussion before, but I had the exact same experience. The tried to charge a purchase on my EXPIRED credit card, then complained that when it didn't go through, I was obviously trying to scam them. Note that this point I'd already given them a new credit card number. I'm sure not faxing them bank statements and my passsport, so I have to get friends to do the pay pal transaction for me.
Ironicaly enough, I just got an email today from paypal telling me my credit card was about the expire. Luckily enough, my spam filter caught it.
Matthew