Some content is taken from http://forums.ebay.co.uk/thread.jspa?threadID=1200182458.
I tried to link my ebay account to my paypal account and it would just simply not work. After going through the prompts many times, it would still say that there was no association. There is a fix in an odd location.
Go to account settings -> addresses
Click on all addresses
Then click on add paypal addresses
This gives yet another paypal login. After login, I was greeted with a message thanking me for creating a paypal account. Hmmm.