I never thought paypals fees were ever really all that bad. At least not compared to ebays ><
Also...since you are conducting this "business" on this site..they do have a right to enforce whatever rules they see fit, as they are put in charge by the people who own the site. And again they do have power over you in the fact that if you use their site to do something they don't want you to do, because they feel upholding another businesses TOS due to complaints about it or whatever, its completely within their right, and they can ban you from using their site to do your business. Don't like it? Then leave. I know that sounds dick, but again, this is their site, and they have a right to set the rules, and by joining, you agree to either abide by them or get out.
Also paypal IS a business, so they do have to pay for stuff, and signing up and getting an account is (at least in my experience) completely free. And again I feel their fees are rather tame, at least in my experience. And just because some of you may have had a bad experience doesn't necessarily mean many other people have not been helped. I mean if you were to have an issue in the real business world, you would have to probably pay quite a bit just to try and get your money back if the person refused, having to go to court, pay the gas, pay the legal fees, pay whatever. And sadly there is still some risk buying online, and sometimes you get shafted, which is why you should attempt to do as much research as you can about the person/people you are buying from. And to make it clear, yes I have had a transaction where the person could not ship me something, but never refunded me, and paypal could do little due to how the person I purchased from had no money in their account/the account was frozen. I cannot recall however if you use a card to pay through paypal, if you can contact your card company to do a reversal or block, especially for larger $$$ purchases, but in this case I had used money straight from my paypal account, but for me, it was only 10 or so dollars.
Still as said, there are other options out there to use, and if someone refuses to use anything other than paypal, look up the fees, and see if, depending on the item, is it really worth it to cry and moan about a buck fifty, or due the trade. Might not be the fairest thing in the world, but what is.