According to Regretsy.com, after an interesting conversation with a Paypal executive, Paypal has issued an apology for the whole debacle. They have also unfrozen both the Regretsy.com account and April's personal account. They will allow her to have fee-free transactions until the end of the year (which is the only way she would use them at this point). Paypal also said in a statement released earlier in the day that they would "make a donation." She discussed this with them over the phone and they offered to donate to the charity of her choice. This was not the intention of the original donation and she suggested that they donate a $100 gift card for each of the 200 families. Paypal seems to be amenable to this idea. We will all have to watch for further updates to ensure that Paypal follows through with their promises.
Either way we have held a large corporation accountable. Great job!