OK, I may have jumped the gun a bit there, depending how accurate the statement before the quotes on regretsy is.

Poking around in PayPal's acceptable use policies, I found that "collecting donations as a charity" is something that needs pre-approval, so the issue may have been "you're a charity, which needs pre-approval" rather than "the Donate button is for nonprofits only". I sent PayPal an email in hopes of getting a clear statement regarding tipjars, but I guess they're quite busy right now...