On this PayPal thing, I think everyone is making a lot of unwarranted assumptions here. First, I don't think the captcha is the same thing as the security challenge. From your description, it sounds to me like the captcha works, but then, PayPal tries to load the "security challenge," which fails.
Second, I don't think either of those things has anything to do with the 2FA method you choose. In my case, the captcha is the very first thing to come up. Then comes the "security challenge," which, for me, fails on the latest St 55 (even with a clean profile). I never even get to a login screen, so PayPal doesn't even know for sure who I am or what my preferred 2FA method is. It just fails to load the security challenge. That's all that happens.
Other people may get these things in a different order. I'm just pointing out that in my case, I can't possibly be getting the security challenge because PayPal thinks I chose an inferior 2FA method. I don't think anyone else is either. If PayPal thought that poorly of email 2FA, they wouldn't offer it in the first place. (BTW, there are ways to hack SMS 2FA too, such as by malware on the phone that forwards the 2FA text to the attacker. And the security of an email account can be anywhere from poor to very good, depending on everything from how good your password is, to whether you also have 2FA on your email account!)
Keep in mind there could be other things blocking the security challenge besides the browser or browser add-ons, such as a hosts file, PiHole on the network, etc. So to be sure, you may need to try a more modern browser. In my case, I can log in successfully using r3dfox (Win 7+ only; if you're on XP, try Supermium instead), so I know in my case it's an issue with St 55 (at least, the latest version). And the captcha is still the very first thing to come up, before it even asks for my ID.