I have experienced the same problem, but in IE only... if I run the same product through the checkout process in Google Chrome, Safari, and Firefox with only PayPal (new API) it works fine and goes to the paypal payment page, but... if I run it through IE8, it will give me the error. Paypal Express checkout works in all instances. I have tested on Google Chrome, Safari, and Firefox in OSX and they all work fine - IE8 gives the error, Google Chrome and IE9 did work in Windows 7.
I have tried with only PayPal (new API) and with other payment methods such as cash on delivery using ps_payment
Virtue Mart needs that value to bypass the traditional credit card type and number validation