Yes, I've had that happen to me once. I think Paypal dropped themselves in the doo doo a while back for not having measures in place to prevent money laundering. Unfortunately, the measures they now have in place puts everyone under scrutiny and as frustrating as it is, there's no way of hurrying them. There wasn't for me anyway.
Yes, I try and avoid that, but choose to do it on a case by case basis. Just have to be nosey with their history first I think.