Date: 2010-08-16 01:15 am (UTC)
Now for my more on-topic answer!

Would the artist have the right to withhold artwork until the full fee has been paid?

No. The artist gave you a price, and you paid that price. They can't just decide to increase it after the fact and hold your work hostage like that.

Is it a courtesy for the commissioner to send more money despite the TOS or should the artist, well, just suck it up because it is due to their own ignorance of the TOS?

The artist needs to suck it up. It's not a "courtesy" to allow someone to break the rules, and you shouldn't allow it to happen.

However, let's say you told them all this but they ignore your warning about the TOS. Should you report someone for breaking the TOS by making your customers pay the fees? Is there even a way to do so?

Open the PayPal dispute to get your money back in the first place, if the commissioner is refusing to deliver your artwork at all.

I believe to report a TOS violation, you would simply open a PayPal dispute about the transaction in question and mention the violation as one of your reasons for the dispute.
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