I'm saying the underlying behavior of holding a reserve is reasonable. I can't comment on whether or not HOW they did it is appropriate--I don't know if they did a poor job of documenting how it works (most payment processing companies have crappy documentation), or if he did a poor job of researching before deciding to use their virtual terminal service.
Other services suggested as alternatives in the Reddit thread, such as Google Checkout, also can hold reserves. This is not a PayPal thing--it is a credit card system thing. The system is designed so that if you end up owing money to the credit card association and member banks (say, for chargebacks), it is the responsibility of your merchant account provider to collect that money from you, and if they can't for some reason (e.g., you are involvement) then THEY have to pay it themselves. Essentially, your merchant account provider is guaranteeing to the credit card associations and the issuing banks that your debts to them will be covered.
Other services suggested as alternatives in the Reddit thread, such as Google Checkout, also can hold reserves. This is not a PayPal thing--it is a credit card system thing. The system is designed so that if you end up owing money to the credit card association and member banks (say, for chargebacks), it is the responsibility of your merchant account provider to collect that money from you, and if they can't for some reason (e.g., you are involvement) then THEY have to pay it themselves. Essentially, your merchant account provider is guaranteeing to the credit card associations and the issuing banks that your debts to them will be covered.