Could I try to get around this by offering two "different" (sharpie a red dot on the bottom of the lamp) items, one you can purchase with paypal and another you cannot. Can Paypal require you to accept paypal on everything your business sells?

I usually just do the opposite. I mark everything up knowing that somewhere a cut will be taken.

If you have to pay me cash, then I just make more on that transaction.

If you're able to sell something at the same rate with an increased price, you should've been doing that before you heard about the credit cards' cut.

You're forgetting the convenience factor that the payment service creates in the market.

Let's say I sell trinkets for $10/each online. They are nice trinkets, but no one really needs my trinkets. No one is going to send me a money order in the mail for a single trinket for $10. Basically, there is no online market at all, unless I can make it easy to buy my product.

But if I charge $11/each and accept Paypal (or credit cards in general), I now have a real market for my trinkets. People like my trinkets, so they will gladly click on a Paypal icon and send me the money that way.

Now my trinkets are somewhat popular. A couple times a year someone stops by my workshop and asks to buy a trinket in person. I still charge them $11.