We use both PayPal and 2CO (not lately, as it's not real easy to setup with our shopping cart).

Both have advantages.

Out of the entire time we used PayPal, we had one major problem with them.

When we had AvidNewMedia, we had a customer who paid her monthly $18.99/mo bill, and was charged $789. It appeared on her card as a charge from PayPal AvidNewMedia. She of course, then did a chargeback.

PayPal told us that there was nothing they could do.

After a week of back and forth communication between the customer and us, the customer and PayPal, PayPal and us, etc, we found that it was PayPal's fault indeed. They used our transaction to bill the customer for an additional amount that she owed them. Since they used our charge to do it, it looked like WE charged her $800. Of course when she did the charge back, she did the chargeback for $789, which went against US. Again, PayPal stated that there was nothing they could do.

We faught it for the entire following week, and finally the chargeback was reversed.