They no longer allow pre-funding your account via PayPal anymore if you have a regular (retail) SnapNames account.
You must have a credit card of file, and their system will charge your credit card immediately after you win anything (you can't opt to delay credit card charge to pay via PP instead). If your credit card payment fails, you get the chance to pay via PayPal.
Only buyers that spend $50,000 to $200,000 per month or more with SnapNames are allowed to pre-fund their accounts with PayPal and choose to automatically delay credit card payment to pay with PayPal. Each of those users have a dedicated account manager that attends to funding the account with funds sent via PayPal. Regular users should pay via credit card.
edit: their operations manager emailed me about half a year ago to inform me that since I have a regular (retail) snapnames account, I would not be allowed to send them funds via PayPal anymore. Prior to that I paid for all purchases via PayPal, and I frequently pre-funded my account by sending them funds via PayPal as well.