From looking at the settings it looks like you're allowed to 'correct minor typos,' so hacking off the last couple letters is probably your best bet?
My paypal is under my current first initial and my last name and I've never had any problems from them about it, fwiw.
It's mostly about preventing fraud, which is admirable. Unfortunately, you are dealing with Paypal, which has to be one of the strangest companies ever. God only knows what they'll do. I would suggest changing the first name field to first name initial<dot>middle name initial<dot>.
