1) this will require redoing your shipping rules completely. In the cart object, create a new column called "realQuantity" for single items, set this column to 1, for the five pack set it to 5.
on the calculations tab create a new calculation called "trueQuantity" as:
[realQuantity] * [Quantity]
in the shipping rules, change the Subtotal for any column; trigger to use the trueQuantity column instead of the Quantity Column.
2) What paypal system are you using? you need to edit the code that passes the name of the item to include the style, this will be different for paypay standard which uses a hidden form element near the bottom of the confirm page to pass the item details, or paypal pro which uses PHP code near the top of the page to pass the info.