One more followup on this – here’s what I found – after I paste the form code in to the editor in HTML mode, if I then edit the form in Visual Mode (say add heading formatting) then it changes the form code. I just re-did the form with new code from PayPal and I double checked their code and it was correct. After I switched to Visual Mode the selector box once was not working right. When I went back to HTML to check it had added the unneeded <Select> formatting.
So basically once you add the code in HTML you cannot then edit anything about the form in Visual Mode or it makes changes.
Maybe you can use the raw shortcode http://www.wprecipes.com/disable-wordpress-automatic-formatting-on-posts-using-a-shortcode which force wp to deactivate the text “optimization” filters.
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