The custom fields are shown on registration. If you're using the Paypal button, then the person will be taken to PayPal to pay and after checkout be taken back to register on your site.
If you want to require the person to register first, you can leave registrations open for free accounts and then show the button only to those logged in so they upgrade to Level 1.
WP Admin -> s2Member -> General Options -> Open Registration
WP Adimn -> s2member -> API / Scripting -> Using Simple ConditionalsI hope that helps.