I've always viewed the use of PayPal as being something that's extremely beneficial to the seller. It's also indisputable that the number of times (in 2002) that you pull out a cc and get charged more for using it is near zero - standard practice is that whatever the price is, you can pay however you like. Now it's true that on a large purchase you can try to negotiate a better cash price, but outside of PayPal, I can't remember the last time I was told there would be a surcharge for paying with plastic. So, again, not because it's unethical, immoral or illegal, but just because protocol exists that says payment form shouldn't alter the price, I have never absorbed the PayPal charges.
Now, if somebody posts a Wadia 861 CD player that I've been searching for and lists a price of $2K and says the only way they'll sell is if Payment is by PayPal with buyer absorbing the cost, I'll pay it in a heartbeat because it's still a great deal. In essence, though, all that's saying is that the negotiating is pre-made - there's no sense in trying to negotiate down because the price is already so good, completely on the seller's terms, that you either hit the offer or move on.
I always find it interesting which threads grow to be the longest - I don't think I could predict which ones will catch fire with any accuracy. -Kirk