We are having the same report for customers on our cart too. (Also paypal.) I see on Paypal that we have not accepted AMEX payments or terms, so that is our issue, but why are we having trouble with Discover?
Okay, just looked at PAYPAL forums and here is something new:
it has to do with linking the Discover Card with Pay Pal...it is not enough to just enter a new card on the payment type page. It is a whole involved process that takes 3 days for Discover to send you a code that you then have to confirm with Pay Pal to complete the link. They charge Discover a refundable $1.95 with the code and if you do not have an on line Discover account you have to wait for the next paper Discover statement to get the code.
This is something that needs to be taken up with PayPal. We don't send payment method or credit card info when we send a customer to PayPal. If you have PDT and IPN setup at PayPal then your site setup should work.