Hi there,
I'm noticing more or less then same thing, but it seems like it has been happening to me for the last couple of weeks or so. Just haven't had time to get to the bottom of it.
Since seeing is believing, here is a screenshot from my iPhone 4:
http://img.skitch.com/20100907-d5bwu6na6dfrujmcpfxywue5c3.png
As it says, "PayPal is not supported on this device". I really don't understand why it would be specific to the 'device', since the payment system is linked to the account, and the account is used by iTunes on the computer, as well as devices like the iPhone, iPad, etc.
I've had two conversations with Apple support people about the problem, and neither of them provided what I would consider a satisfactory answer -- it sounded to me like they sort of knew there was a problem, but were talking around it –– very politely, though. 🙂
I guess it may have something to do with the security problems with Apple and PayPal that were mentioned in this BBC article a couple weeks ago:
http://www.bbc.co.uk/news/technology-11065301
Anyway, I'd love to hear if anybody else is seeing similar issues.