First of all, sorry for our very slow reply here. This topic has been flagged to me several time by the rest of the team, and due to a "human CPU overflow" (aka way too much work for my available 24 hours a day), it got delayed! Sorry about that. Time getting back under control, things should be better now.
There must be a configuration error in your paypal test account settings. E.g. you are forcing a return URL ? The return URL is given by CBSubs's request to paypal and should not be defined in paypal.
Wondering if best and fastest would not be to start with a clean new paypal test account, and follow the Paypal setup chapter in the CBSubs guide step-by-step ?
The guide is here at end:
www.joomlapolis.com/downloads/downloads-single-items/cat_view/118-cbsubs-gpl-download-area
And there is a section 7.4.2 (page 201-210) for paypal setup (you should not setup the paypal encryption described pages 211+, which is not needed in 99.999% of cases given that https is used).
Once that is followed, your paypal setup should work just fine.
IMPORTANT:
start from a clean new paypal business test account, as the instructions suppose that unmodified settings are in their default state both at paypal and in CBSubs.
Please reply after that here on how your clean setup is working.