Ray - I re-did the checkout pages with the wizard again and am now able to connect to PayPal.
The only problem I have now is that the purchase does not go through and leads to the checkout_failure.php page. I imagine that this now is probably only a minor problem and it sort of looks like it might be a verification problem but can't see what is be wrong.
I will attach the error message of the checkout_failure.php page. Could you kindly have a look and see what might be wrong.
Thanks a lot.
UPDATE TO MY POST:
Back to the initial problem. So frustrating.
I managed to get the connection to PayPal going after doing the checkout wizard again but then had the problem that the progress wheel kept spinning in the checkout.php page after clicking continue not opening the payment section. (I had the same trouble with that previously). After solving that again I am now back to paypal not connecting and the checkout_failure.php page opening in the paypal window.