I am also running 1.3.5 and having similar problems with "IPN WARNING::Transaction email address not matched." having examined the logs.
I found this earlier... it might help.
http://www.zen-cart.com/forum/showthread.php?t=48467
Something about modifying line 60 of includes/modules/payment/paypal/paypal_functions.php
from
if ($postArray['business'] != strtolower(MODULE_PAYMENT_PAYPAL_BUSINESS_ID)) {
to
if (strtolower($postArray['business']) != strtolower(MODULE_PAYMENT_PAYPAL_BUSINESS_ID)) {
This was apparently fixed in 1.3.6 but I don't have time to upgrade at the moment. Also, for those not seeing an order number when they get redirected back to their cart, you might want to hit the "refresh" button.
Arnold
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