I had an IPN problem too, and in case it helps anyone else I'll share a couple of tips:

1) Make sure the IPN URL is blank--delete out the "http://" it's pre-filled with.
2) If you have HTTP authentication on your site (i.e. password protected) then IPN will not work! I had a password on my web root while developing the site, and IPN didn't work until I removed it.