INGDirect savings account is 3.4% currently, FDIC insured just like any other bank. That's where I keep my short term savings account. I mean I keep like $500 in the savings account at the bank where I have my checking accounts, but outside of that, it's all at INGDirect (I have my 1st/2nd mortgages thru INGDirect as well).
Regarding Paypal, I have an account, I find it very convenient when eBaying. I also have a $5000 Paypal LOC that I use for purchases because, just like with my checking account link, I get automatic insurance on the purchases (with credit card purchases using Paypal you don't get this). I don't do a whole lot of sales on eBay so I'm not very knowledgeable about the fee structure for selling goods in respect to Paypal, is that what some of you are complaining about?
