Paypal custom amount for "Donate Now" button

Yes, there's an HTML input parameter for this. Simply called 'amount'.
See https://cms.paypal.com/us/cgi-bin/?cmd=_render-content&content_ID=developer/e_howto_html_Appx_websitestandard_htmlvariables

Just include amount in any HTML input/select field and ensure you pass it over to PayPal. For example:

<label for="amount">Enter the amount you wish to donate:</label> 
<input type="text" id="amount" name="amount" value"">

Or;

<label for="amount">Select the amount you wish to donate:</label> 
<select name="amount" id="amount">
<option value="5.00">$5.00</option>
<option value="25.00">$25.00</option>
<option value="50.00">$50.00</option>
</select>

Wikipedia uses some server-side scripting to create a transaction before it sends you to Paypal. This is the shopping cart functionality, yes, specifically the Express Checkout part.

I believe that this image illustrates the process:

_{(source: paypal.com)}

Don't worry - it looks harder than it is: it's very easy to implement.