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I don’t know if this is a WP plugin issue or a PayPal issue
In PayPal I configured one Domestic shipping rate (for all states) and several Priority shipping based on groups of states.
I have checked PayPal Profile Shipping in the WP plugin. It must be working since I now see the Priority Shipping in the PayPal checkout page. However I don’t see an option for the lower cost Domestic option.
When you use profile based shipping our plugin simply doesn’t handle any shipping. Instead it lets paypal apply the shipping. When the user goes to the paypal checkout page, the shipping is applied according to the conditions you set in your paypal account. This plugin has no control over that.
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