Thanks for the suggestions. I now found why I am getting the "ReturnURL is invalid", its because I have changed:

define('HTTP_SERVER', 'http://www.mysite.com');
define('HTTPS_SERVER', 'https://www.mysite.com');

to:

define('HTTP_SERVER', '');
define('HTTPS_SERVER', '');

in /includes/configure.php

I did this in order to be able to direct my "multi-domain/language on same server site" to the correct domains/languages. Anyway, I guess PayPal needs the "define('HTTP_SERVER', 'http://www.mysite.com');" statements. Im wondering if there is another way of telling PayPal what domain to use??