It is true, PayPal wants your SS#. You are not sending your # to them in an email. You have to go to your account and update your information, just like your entered your bank account #. My husband got the same request. This is what was in the FAQs on the PayPal website.
"What happens if I don’t provide my tax ID number?"
In 2011, if you do not provide your tax ID number (Social Security Number (SSN), Employer Identification Number (EIN), or Individual Tax Identification Number (ITIN)) after we’ve requested it, we may place the following limitations on your account:
You’ll be unable to receive funds into your account.
You won’t be able to close your account.
The limitations will be removed after your provide your tax ID number.