paypal's micro-exchange rate is 5 cents + %5, so that's 10 cents for a 1 dollar transaction.  But if I do a 1-dollar bitcoin transaction and if the transition fee is .0010, then that is worse than the 10-cent paypal fee when the exchange rate is >100 USD/BTC.  Transaction fees for these micro-transactions really need to be significantly lower (like no more than a cent for a dollar) if bitcoin is going to be a competitive micro-payment solution, such as for instant music downloads for $1 in BTC.