Yes, I will definitely complain to the FSA if this is not resolved satisfactorily with PayPal. Good suggestion about Working Lunch - I´m thinking about various other newspapers etc who do this kind of thing, although I bet they get quite a few complaints about EBay/PayPal judging from what I have read on the internet.
Unfortunately I think I have found out why PayPal aren´t prepared to pay out under their Seller Protection policy and why they are not even answering my e-mails to them about this. According to www.paypalsucks.com its actually a sham and is not possible to comply with their requirements: