Hi Bevan,
The reason step 2 gets skipped is because paypal standard is setup to be your primary gateway. All hosted gateways are programmed to skip page 2 of the cart. If you would like the checkout to work how you are requesting we would need to change the code behind. If you would like receive a fixed quote to change the checkout process please submit a quote request at the following link:
http://www.smith-consulting.com/servi...
Please let me know if you have any further questions or concerns. Thank you!