One of the properties of money is that it's useful as a medium of exchange.

If this property is sacrificed in the interest of making it difficult to 'launder', then its utility is questionable.

True and I'm not trying to undermine the point that Paypal is a complete PITA but..

One of the properties of money is that it's value can be trusted. If money can be easily laundered then it can't be trusted and it's utility is questionable.

Counterfeiting changes the value of money. Laundering doesn't. It just hides the flow of money from authorities.

I understand your point, what I'm saying is that even after following all of PayPal's instructions, re-verifications and talking to customer services - as well as telling them (as the buyer) that the transaction is legit, I wasn't able to sort it out.