hmm, IPN is setup through admin, and there is a link to test it functions okay - the problem was penetrating Dragonfly. The next version reverts to IPN exclusively since PDT has created some confusion for people and does create issues with other apps using IPN if you only have one Paypal account but want to use it for several sites and/or applications.
However, I have added an extra admin variable which does allow you to switch between paypal and the developer (sandbox) site so that you test to your heart's content. Currently I do this by changing a couple of variables in the code which is a pita. Note, you will need to sign up (free) to
developer.paypal.com/ and build a test seller account and a test user account. Paypal provide plenty of support for this, including a support forum, so I won't be getting involved in this at all.