However, when you deal with your bank, you usually have a business banker with a name, a phone number and an office. You are never in a hopeless support ticket black hole. That makes a big difference.
With PayPal you can be operating in an hour. They're also cheaper than all banks, unless you have some serious transaction volume. You can hook it into a simple website and start processing payments without even a https cert.
Of course, any serious site will want their own merchant account, credit card processing and the rest. But before you get to that point PayPal is a very handy shortcut that has enabled millions of small sites and sellers.
When PayPal starts charging and acting like a bank, then you can compare the service levels. I personally think, that for the transaction scale and amount of fraud they have to deal with, PayPal does a relatively good job. They aren't saints, but for the vast majority, PayPal transactions work as designed.
In other words : you get what you pay for.
It's not that hard to get an account, especially if you already exist as a customer, even a private one. The costs tend to even out over a certain volume but again, they aren't that high. I'm not sure how easy it would be if you weren't a company, didn't have an address and weren't a customer.
In Australia the most common setup is site + payment gateway (bank or 3rd party) + merchant account. If you are using some existing ecommerce software (hosted, bought or OS) it usually integrates pretty easily with large payment gateways. It all costs about 2-$400 per year plus processing fees, not much different to in store CC processing. I think it ends up at parity with paypal at around 50-$150k depending of total transaction volume (depending on transaction sizes), so you are right that it doesn't scale to micro business levels very easily.
But banks, difficult and bureaucratic as they are do compete for business clients and they do it mostly on the back of customer service.
With paypal you don't get what you pay for. If you transact $7.22 per year you get the same service as $722k.
That's a good point actually. Maybe the anti-PayPal meme might die a little if you could actually get preferred service (and not frozen accounts) if you have a history of processing payments over a certain level. They already know who that is because they give you better pricing for volume.
Banks' solution to this sort of thing is low tech. Have a local banker talk to you, maybe pay a visit.
Also, I've heard examples where this is not the case. Eg Couldn't get Paypal to pick up the phone even though paypal was holding $100ks of their money. (http://mixergy.com/dodocase-patrick-buckley-interview/)
More recently, I had two payment disputes by scumbags. In both instances, I called up paypal and less than 2 minutes of conversation later, I had my money back in my account. Blew me away. I honestly had written those disputes off going by what I'd heard.
I remain in two minds about attacking paypal for account blocks. Almost every company that dares go after this space will have to do their fair share of blocks or risk losing money to fraud. Obviously when you do blocks, innocent bystanders may get caught. I don't think that is a paypal problem as much as it is an industry reality. PayPal's just at a scale where you hear a lot more stories.
Until there is a competitor with some sort of scale that does not need to do account blocks, I'm not sold on attacking PP.