Just to be sure, you did enter the verification code (the four digit number on the front of the card printed in black ink, not the three digit on the back in the signature strip) correctly, right?
try to link it as the other type (if you linked as credit card, try link as debit card, and vice versa). Sometimes merchant work with prepaid cards in different ways.
Also, is that card a temporary prepaid card that you just bought from convenience store or a permanent card?
In my experience, Paypal will try to match up address/zip for first use, and of course that won't be present with a prepaid card.
A key problem with prepaid cards is using it up completely, which is difficult with eBay/Paypal purchases. I'd suggest using prepaid cards in full all at once (e.g. to pay a larger bill, or for a routine prepayment situation like a gym or coffee shop or whatever. I use any I get to pay down a season ticket bill or to load my account at my regular coffee shop.
Using it up all in one transaction right away makes sure you get full value, without losing any to fees if you forget about it.