Can you maybe provide some more information, like the exact error message you are receiving, at which point exactly it happens and which browser (including version) you are using?
That should help in getting closer to the cause of the issue.
Also, did you try with different browsers? (you might need to set another browser as default in Windows / Mac OS)
The web browser I'm using is Apple's Safari 5.1 which I've used before in linking PayPal to my Apple ID. I had un-linked PayPal as I wasn't buying from App Store lately but now realize I need it to even download updates to my apps or re-download my music from the cloud. I don't know how/why iTunes Store session times out as soon as I try to add my PayPal. Will try changing default browser and see if that helps but don't see why that should be the issue.
Exact error message is this:
Your attempt to set up your PayPal account for use in the iTunes Store was unsuccessful.
Your iTunes Store session has timed out.
Update: Changed default browser to Mozilla Firefox 5.0.1 and tried but that didn't help either. Don't think its a browser issue. I tried with the latest version of Safari and a slightly outdated version of Firefox. I'm using the Firefox Optimized for Yahoo software which does not provide Firefox 6 install yet.
Yeah its a problem in iTunes. Running iTunes 10.3 by the way but don't think that should matter. Have held off on iTunes 10.4 because it breaks iTunes from working with Front Row.
Update: Okay I just discovered something strange. I have 2 Apple IDs both of which lacked payment information. On my other one logged in and was able to add my PayPal but the one I reported the problem with it stll says my iTunes Store session timed out when trying to add PayPal. So there is something screwy going on with that account. Have already written Apple earlier on this will have to do so again to provide them this new information I discovered.