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I would love to know how you have your paid subsciptions set up.

Sometimes users donate to the running of UKDivers.com And it would be cool to have the system automaticaly update them to Sponsers, at the moment when I get the notification from PayPal I do it manualy.
Why do you do it manually? Just have it set up so that when they donate, they are actually subscribing so they can be automatically updated to Sponsors. Of course, you would have to make it clear that they will be automatically charged again after a certain time frame unless they cancel, but it isn't that hard to cancel a subscription with paypal. As long as they want to be sponsors, they should want to continue the subscription.