Okay so I have gathered from all the information posted here that PayPal wants to create a hardware wallet and a debit card that connect to a virtual currency wallet. I guess PayPal being in control of the accounts will make this whole system strongly centralized and on top of that the PayPal alt coin if I can call it that will be reversible and disputes will actually be permitted. I don't think the Bitcoin community would be happy with these circumstances as this goes against the Bitcoin motto of freedom and decentralization. But I guess this new coin would appeal to merchants and service providers for doing business online. I think the chances of PayPal accepting Bitcoin directly in their system are slim, it's more likely that they are banking on the Blockchain technology itself.