My client is using v1.3.7 and it looks like the updated file for this version, available in resources (updated on 06 Apr 2010 2:40 PM) works.

Please note, that I made 3 minor revertions to variable name changes suggested as my original file had the word NOCHEX rather than PAYPAL in these variable names.

So, I did the following...

Line 123:

Code:
  $new_status = MODULE_PAYMENT_PAYPAL_ORDER_STATUS_ID;
Changed to:

Code:
  $new_status = MODULE_PAYMENT_NOCHEX_ORDER_STATUS_ID;
Line 125:

Code:
    $new_status = MODULE_PAYMENT_PAYPAL_PROCESSING_STATUS_ID;
Changed to:

Code:
    $new_status = MODULE_PAYMENT_NOCHEX_PROCESSING_STATUS_ID;
Line 128:

Code:
                    set orders_status = " . MODULE_PAYMENT_PAYPAL_PROCESSING_STATUS_ID . "
Changed to:

Code:
                    set orders_status = " . MODULE_PAYMENT_NOCHEX_PROCESSING_STATUS_ID . "