Logged into my Paypal account recently and wanted to refresh the password just to be sure.
I discovered that to change the password, you have to answer the 2 secret questions first. Forgot the secret questions, because i never forget my password :-P
Found out that there is no way to reset this via your account setting. The only thing you can do is log out, enter your email adress you registered with and press 'forgot password'. You will receive an email and just proceed to the last step which says: Contact us by phone.
Just call the number and provide them with all your details and they will mail you a certain code with which you can reset your password AND secret questions.
Asked PayPal why they use these secret questions and they say that this is because they are a bank and have to comply to this standard.