To me it sounds like she hasn't changed the delivery address from hers to her Aussie friend's - eBay does not apply GST to sales from an Aussie seller being delivered to an Aussie buyer, and they shouldn't be applying US sales tax if the delivery address is not to a state where US sales tax would apply (I know this as there are now mail services in the US where you can get an address in a state where the sales tax doesn't apply and use that instead, and then the package gets automatically redirected, so presumably it will also not apply tax when an international address is used, either).
Though, I guess that doesn't explain the PayPal issue, and the payment not being processed, as presumably you will post to her delivery address either way.
Ask her to send a screenshot of the error message PayPal is giving her (and / or google any error codes), as that seems to be where everything is breaking down.
