Our store has accepted PayPal for about five years now and we haven't had any problems.
We do keep a separate bank account for receiving the funds transfers from PayPal. I wouldn't have thought to do that, except that one of the ladies I work with had PayPal empty out her checking account - some sort of fraud or error - whichever it was, it took her several days to get it sorted out and in the meantime she was not able to pay her bills, because the account was empty.
For what it's worth... if you accept checks, you will probably get a few each year that bounce. When I used to accept credit cards at craft shows, I did not have the ability to charge the cards at the show, so I didn't find out until I got home each night whether the cards would be valid or not. And every year, a few credit card payments would not go through. And, accepting credit cards, you will still get a few fraudulent charges and/or disputes each year. So just be aware that this can - and probably will - happen. EVEN if you do everything right.
As other people have said, getting proof of delivery is the one way you can have seller protection with PayPal. That said, you're supposed to ship to confirmed addresses, otherwise you will not have full seller protection. Many PayPal customers do not bother to confirm their addresses.
Whatever you choose, you will want to carefully think through what your policies will be, and be sure to post them clearly on your site or in your store.
Best of luck to you! :)