Yes, I've done both actually.

I have tried completing the order all the way through PayPal until I am taken back to my site, and then "shipped the item", and then even run cron.

I have also tried just "submitting" the order, and then checked inventory in the uc_simpleinventory table after the first PayPal page loads up. (As far as I can tell by looking at the source, this should be sufficient to decrease the inventory.)

Perhaps I should revert back from the bazaar version to the 5.x-1.0-alpha7b version?

Perhaps I should restart with a fresh Drupal install with PHP5 as default?

Can you tell me which version of Drupal and Ãœbercart you have working with your most recent version of uc_simpleinventory? And I assume you have tested an order submission and your stock level actually decreased upon submitting the order? I can then set mine up just like yours.