I use two wallets, blockchain and myceliuim. For security reason is good to use more then just one wallet and myccelium is very convenient because is Android based so I can do everything without access to the computer and it's prety safe. Blockchain is more for some smaller amounts and transactions.
PayPal is online Money service and Bitconi is virtual currency, these are two different things. So, I don't think that Bitcoin could replace PayPal but with time PayPal could embrase Bitcoin and I think that is what the most users would like to happen.
I use blockchain wallet and so far had no issues. But there is no 100% guarantee that it will not be compromised. So, it's better not to keep all your coins just in one wallet and also to have something in cold storage, especialy the larger amounts.