Trouble using Paypal at the iTunes store

I have an iTunes account. I have enjoyed trouble free service, until now.
I decided to set up my daughter with her own account. First, I set up a Paypal account for here and put a little cash in it. Then, she and I set up an iTunes account for her, a nice lesson in online shopping and financial responsiblity. When I attempted to use Paypal as the method of payment, I was directed to a series of Paypal pages to complete the process. I was asked to supply a credit card as a backup funding source. There seems to be no way around this, or is there?
Here's the rub: I specifically used a Paypal account so that my daughter would be paying cash (electronically speaking). If I wanted to use a credit (or debit) card number, I would have simply used one at the iTunes store rather than Paypal. It doesn't make sense. Jillions of other online vendors accept Paypal and if there is a balance in my account they don't care if there is a credit card backup. They are happy to take the cash. Besides, it's not like there is large amount at stake.
Am I missing something? Thanks in advance for any advice and help.
Mac Mini Mac OS X (10.4.8)

Paypal use to work as you say. It was all contained inside of iTunes without taking you to a secondary app (Browser) and forcing you to go through their protocol. You can't buy Gift Certificates now using Paypal either and if you try it takes you to Apples website and then never gives you a paypal option.
Yet on Apples own site they say Paypal is accepted when it's not an option for payment? Apple seems to be making a lot of mistakes lately. With Zune around the corner they better focus on GREAT customer service or they'll loose massive market share.

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Trouble using Paypal at the iTunes store

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