Update 2016-01-13: Apparently PayPal has changed their sandbox developer
account setup UI and such since I wrote this post together with the
PDT and IPN blog posts.
Luckily it's much easier now, and you should be able to get all the
information you need from their own PayPal Sandbox Testing
I've also decided to delete the old contents of this post to prevent anyone
from trying to follow the now incorrect steps. 🙂