Using a dropdown menu rather than a text box to apply different discounts to your PayPal button is actually very simple.
All you need to do is change this code:

<input type = "text" size = "10" name = "coupcode"; />

to this:

 <select name= "coupcode";>
 <option value="coupl"> Friend
 <option value="coup2" > Online
 <option value="coup3">Other
 </select>

You can see a working example of this at http://icode4you.net/wp-content/uploads/2011/11/coupon.html.