Paypal requiring cash or Paypal credit card?

No, I've gotten that before. It is based on the type of the transaction and the email address you're sending to (and probably from), plus the amount of the transaction. They are trying to protect against theft, so for instance, you will get it if you are trying to send a large amount to a free e-mail account, like hotmail or netscape.net or yahoo, or if you are paying for electronics which are more often fraudulent. I had one transaction where it would toggle in and out of credit card mode just based on the e-mail address I was sending it to.

I think Paypal now only allows credit card use with vendors, not prive party sellers.

I hopw I am wrong.

Personal accounts can't accept credit cards ('cause these accounts are free). Business accounts almost always accept credit cards (since that's the main point of having a business account), but they have the option of disallowing credit cards.