From the post: "Even though we’ve complied with every PayPal request, including providing them with our certificate of incorporation, they still won’t give us an explanation for any of their moves."
It seems that Diaspora weren't unwilling to verify their identity.
Yes, although the blog post that their account was frozen is dated yesterday, so who knows if anyone at PayPal has even had a chance to review it yet. That indie developer (I forget their name to look it up again) had also posted on their blog that their account was closed, then a few days later PayPal reversed itself and reopened it -- that may still happen here. I hope it does, as on its face Diaspora doesn't seem like an organization that would attract too much risk.
It seems that Diaspora weren't unwilling to verify their identity.