I think people use Paypal because it's easy to use in general, not because it makes tax evasion easier (I suspect it's a pretty dumb choice for that :) ). Taxes need to be paid regardless of how the money get brought into the country, and Canada and the US have a pretty well understood tax treaty.

When I opened up my account at the BOA, it seemed to be a very well used and smooth process - they mentioned that the number of Canadians holding accounts at that branch (close to the border) was a significant percentage of their total. I really doubt it raises any red flags on it's own - there are a lot of legitimate legal reasons for the arrangement.