First off -- nice game. I really like it. Very well done. Second, I played it a few times and I think that I understand what your saying:
when I move the paddle towards the ball as it is passing it appears two of my collision points are within the paddle and therefore the ball keeps repeatedly bouncing up and down within the paddle.
however I don't think that I was able to reproduce the issue at all. I tried moving the paddle left or right into the ball as it was passing the paddle -- is this when you're saying you're seeing this problem occur? It seems like a difficult issue to reproduce. Most of the time I guess I was too slow, and the ball passed by, and the other half of the time I think I was just barely too fast and caught the ball before it started by me -- there seems to be a rectangle around the ball and so maybe the collision doesn't seem as natural as I would have expected. Do you have any more detail on what exactly is happening and how to reproduce it?
As an aside to my blabbering, there are several more complicated collision algorithms around. I can search some up if you'd like, but I'll just be using Google probably. So let me know.