Cannot properly configure PayPal Sandbox
I think you've found a bug. I just confirmed that if on 4.7.8 - you have - under Processor Details for Test Payments:



And then hit Save = you end up with [for the very same Processor Details for Test Payments]:



Go ahead and file this on JIRA: http://issues.civicrm.org - not sure why those settings are not retained. They certainly used to be completely functional.

In the mean time I'd recommend run some Live Tests - with real easy to spot $ ($1.11, $2.22 etc).