If you have cash in the account, you CANNOT use a CC funded payment, period, end stop. You can only use CC or Instant transfer to cover funds needed above and beyond the cash balance.
My advice is that you never ever pay with a cash balance . If there is a problem, your only recourse is through PayPal, and PayPal was deliberately created to exist in a regulatory black hole. IT is neither a Bank or a Financial Service Company, so the normal rules don't apply.
Any transaction involving a bank or a credit card has specific mechanisms mandated by Law to deal with fraud etc.
If you send money from a cash balance to someone, and they abscond with it, you are likely to get a lovely message from paypal when the smoke clears. Yes, you got 'screwed', but no, we cannot get your money back!
Been there, done that. Fortunately it wasn't a lot of money, but I learned the important lesson.
The reason PayPal doesn't like you to fund transactions with Credit cards is credit cards are by definition, a transaction that can be reversed. If you dispute the charge, and the credit card company agrees you were defrauded, they do the charge back, and if PayPal doesn't like it (and they sure don't), it is too bad for PayPal.
If it is a transaction that was funded by a balance in a PayPal account, PayPal can tell you to take a flying leap.
As for the buyer protection, read it carefully. Screen doors have fewer holes in them.