When you called PayPal did they tell you about the PayPal security key? It is a somewhat new feature.
I had a similar experience and PayPal immediately locked up the account before the transaction was completed. When I called they gave me the PayPal security key. It is the size of a credit card and displays a random number every time you access or use your PayPal account. The account is useless if you don't have the card. It costs $5.00 and in my opinion it is $5 well spent.
Here is a link for more info:
https://www.paypal.com/cgi-bin/webscr?cmd=xpt/Marketing_CommandDriven/securitycenter/PayPalSecurityKey-outside]
https://www.paypal.com/cgi-bin/websc...ityKey-outside[/url]
You don't need a new PayPal account, you just need to change your password and get the security key.
I am sorry it happened to you. I, too, had to learn this the hard way. It is a real pain to deal with.