I apologize for replying to myself in a frenzy, but I have some more info.
Part of my problem had absolutely nothing to do with the PayPal IPN module. Embarassingly it was caused by the download files not existing on my development server. :)
But there is still an issue (indirectly) with this module.
After clicking "Continue" at PayPal and being redirected back to checkout_success.php, the variable $products_array does not exist, so osC is unable to present a list of products for which to enable notification. Also, $last_order does not exist, so includes/modules/downloads.php is unable to present the download links.
Any ideas on this one?
Thanks folks.
- Eric