If it is for a pick up only item the seller may have done this to put buyers off choosing Paypal which is completely unsafe for both buyer and seller. I would be inclined to just leave it if that is the case although there are much better ways of making certain they only use cash on pick up.

If it isn't a pick up item then definitely report it as it is against both ebay and Paypal policy to add any extra fee for using Paypal.