I loathe saying this. I actually feel dirty just forming the words on my fingertips, but…use IE.
Oddly enough, iTunes does not support signing up using PayPal with Firefox as your default browser. That means, temporarily, you will need to set IE as your default browser, then follow the steps to sign up with iTunes using PayPal. Once you’ve completed it, reset Firefox as your default browser.
It would help so much if iTunes actually listed this in their FAQ or, even better, learned to work with Firefox.