Error - Return to Merchant

[tzeus]

Hello,
I seem to be constantly getting this error:
Unable to process payment. Please contact the merchant as the shipping address provided by the merchant is invalid, and the merchant has requested that your order must be shipped to that address.

I don't really understand what i do wrong.
I read on the forums the topic about this error, but did not quite got the answer. I am using Latest Virtuemart version, obtained via auto update(2.0.6) and Joomla 2.5
I tried configuring sandbox, but i don't really know if i got it right, so i tried testing with real account, and small money values(1$). No matter each way i go, i get the same error.
I tried setting let buyer override address, to yes / no - same result.
I tried setting Prompt for an address but do / do NOT require one - same result. I am still getting the error and have no idea how to fix it. I am a beginner at virtuemart so i may be doing something very wrong and not realize it.

Where do i go wrong about this?

And i have one more question regarding sandbox, since i have no way of being sure i configured it right.
I created my sandbox account, and 1 business and 1 personal account. In the PayPal configuration on the website i entered the business account as sandbox email(the one provided by paypal sandbox) and i created a new user that has the same  email address / mail address of the personal account provided by sandbox. IS this all that i have to do ?