The "FY PayPal" wasn't posted until the mentioned conversation with the representative took place, which was quite ridiculous and Helen Killer had all the right to get all that angry, but then it's not PayPal's fault but the representative's own stupidity.
I use the "Donate" button regularly, and no, it's not always "for charity" or "non-profit", sometimes it's for worthy people who put their work out to the world and asking for nothing in return (Programmers and developers of open source and free software mostly).
It is just a single isolated incident of a customer service representative's incompetency. Paypal have done more than they have to, they corrected the man's wrongdoing, apologised, and even done a donation to the affected fund themselves... Now WE would be the greedy #$#$# if we still require more than that from the company! Those who've closed their accounts and swore not to deal with paypal ever again are simply way too emotional and not willing to forgive others even when others admit that they're at fault!
I don't know, but in less words, an incident happened, it was awful, but paypal reacted in a really nice manner and corrected it. So well done paypal, I'm renewing my trust in them, and I believe that specific representative is gonna have some well-deserved scolding...