That help page is demonstrably wrong. If it were true you could not pay itch for the hentai games. Or steam. Steam does accept paypal, does it not? Or patreon for that matter.
You can pay digital sexual orientated "goods" with a paypal account. Even internationally. I should know because I even pay VAT for those hentai games on itch. Maybe they do not consider cartoon porn as sexually orientated? Maybe that help page writer ignored the approval thing? It is forbidden without approval, that is true. Does this vague talk even apply to lewd games? I suspect they want to avoid payments for hookers or webcam services. I live in Europe and paid actual physical sex toys with paypal for crying out loud. I know there are states in the US where such toys would be a problem, like legally. Wich tells me that this phrase is void in my opinion: "violate any law, statute, ordinance or regulation" . Sex toys are illegal in some states, they did violate those rules. But they did not apply. The items are legal where the buyer is and legal where the seller is, so pp should shut its cakehole.
But I know what you mean, so I specifically checked, if that pages is displayed differently if you give another location. I tried India and Japan. They display the same tos with the approval note. So if you would apply and get denied, my guess would be, that it is some other problem, like them not approving very small businesses, or for tax reasons. I did mention the VAT? If I pay for porn here on itch, I have to pay surcharge in taxes. I recently bought a game on itch for like 16 bucks. I had to pay over 20 before currency exchange. I saved a buck, because I did not use pp exchange, but the one of my credit card.