SOLVED:

I knew it would be something simple -

the client had at changed their email address relating to their account within paypal.

In the box:

'PayPal Business (email or secure merchant ID):'

I had put the secure merchant ID - There seemed to be no reason for this not to work as the ID matches the ID displayed in the live paypal account.

I replaced the 'secure merchant ID' with the changed email address, and now the system works.

I knew it was something simple! -

Odd that the ID doesn't work, but the email does.

but no matter - I'm no longer breaking out into sweats over this.

thanks to all who helped with this. Thanks Beat for suggesting the obvious regarding clues in the notifications logs.

still not sure why the secure merchant ID didn't work, but never mind, thanks all