Hi. I JUST had this problem as well. No idea what finally made paypal accept the updated card info, but I made a public complaint via twitter and I think that escalated my ticket. I've never had such a quick response to a ticket before. Normally it takes a solid day to get a response, but this one was addressed within an hour of my submitting my issue.
If you're going to go the public route, make sure you have all your documentation. Screenshot proof of your new card activation as well as the error messages you get telling you that you cannot update your card. Try a few browsers, screenshot the error messages. You want them to know that you are not stupid, that you have done your due diligence, that you are willing to shame them publicly, and that you are ready to take your business elsewhere.
Even though I submit proof of the error messages, the CS person said they didn't see any error issues associated with my account. I think that's crap and that they swept up whatever issue it was and then pretended nothing was wrong because even though I tried and failed to update my card right before I submit my ticket, I was able to update my card after the CS person looked at my account. Go figure.
