That is because, unfortunately, flash textfields are limited to just text with simple text-formatting, and do not support html like <form>, which is used for the default Paypal button. Instead, you need to embed the image with URL parameters instead of using the form.
As example, a Paypal button may look like this:
<form action="https://www.paypal.com/cgi-bin/webscr" method="post"><input type="hidden" name="cmd" value="_xclick"><input type="hidden" name="business" value="paypal@www.photo.gallery"><input type="hidden" name="item_name" value="ImageVue Commercial Licence"><input type="hidden" name="item_number" value="1"><input type="hidden" name="amount" value="150.00"><input type="hidden" name="no_shipping" value="1"><input type="hidden" name="no_note" value="1"><input type="hidden" name="currency_code" value="USD"><input type="hidden" name="bn" value="PP-BuyNowBF"><input type="hidden" name="lc" value="US"><input class="paypal" title="Purchase with Paypal" type="image" name="submit" src="http://www.photo.gallery/wp-content/uploads/2010/07/paypal.gif" alt="Make payments with PayPal - it's fast, free and secure!"></form>
You need to take all the values, and instead place them as URL parameters, so the link would look like this:
https://www.paypal.com/cgi-bin/webscr?cmd=_xclick&business=paypal@www.photo.gallery&item_name=Imagevue%20Commercial%20License&item_number=1&amount=150.00&no_shipping=1&no_note=1&curency_code=USD&nb=PP-BuyNowBF&lc=US
Furthermore, adding the image and the code:
<a href="https://www.paypal.com/cgi-bin/webscr?cmd=_xclick&business=paypal@www.photo.gallery&item_name=Imagevue%20Commercial%20License&item_number=1&amount=150.00&no_shipping=1&no_note=1&curency_code=USD&nb=PP-BuyNowBF&lc=US" target="_blank"><img src="http://www.photo.gallery/wp-content/uploads/2010/07/paypal.gif"/></a>