I promised to update this thread should further information is available.
I was just forwarded a direct response from Google, which is possibly the most specific reply to date regarding if web hosting can be sold with Google's merchant platform.
The question was asked having the aforementioned sign-up instructions proposed earlier in this thread. In summary, "when you sign up here (http://www.google.com/wallet/business/
) you'll be taken to the API information page. By selecting Digital Goods, then filling out form and selecting Internet, Network, and Digital Media (not selecting Services) as Primary product type - that would allow you to sell web hosting and domain registration services."
Thank you for your question.
I understand that a merchant from an online blog gave out information that you can sign up for Google Wallet for Digital Goods and be able to sell web hosting. However, web hosting is classified here in Google that it is a type of a service that we can no longer support give that Google Checkout is retiring on November 20, 2013. If ever a merchant found a way to set up an account to sell web hosting using Google Wallet for Digital Goods, please be informed that Google is constantly reviewing our merchant accounts, and once it is reviewed, the account will then be suspended and further closed by Google. I understand if you still want to try to setup a merchant account using Google Wallet for Digital Goods, however we strongly don't recommend it to any of our existing Google Checkout merchants selling web hosting.
We appreciate your understanding.
The Google Checkout Team
If you have additional questions, please visit our Help Center at http://support.google.com/checkout/sell/"
I think we can finally say this with full confidence: Google Wallet is not suitable and will not support web hosting as a type of service/product you can sell through it.
And if someone found a way to sign up while they are in transition period, it doesn't mean they'll be able to continue using the service come November, as Google will terminate such accounts.
So, enjoy it while it lasts.