Well, paypal is "fixed" I ordered the security key from them to see if it will help. The only problem now is that someone tried to access my bank account. The good news is that as soon as they logged in from a different IP address, my bank froze the account. I will be going to the bank tomorrow to close that account and open a new one. I will also look into getting overdraft protection service. Don't think I can stand to pay thousands of dollars for NSF fees...
So the initial problem was with a scammer and not PayPal.
I'm not sure. I used my paypal account several times in the past week (was buying cloth diapers, in case you weren't grossed out), and I think that it might be one of those people I sent the money to. But no, the problem originated with paypal as far as I can tell. They only looked at my bank account on Sunday and the money was taken out/put in paypal on Friday and Saturday.