I think Bitcoin has the potential to overwhelm paypal but there are two things I'm not sure about Bitcoin that are unstable prices and too long transaction time.
Too long transaction times are already a non-issue when accepting zero-confirmation payments.
I think zero confirmation payments system is very risky to apply. I do not think online shops would dare use the system because they might be cheated when using zero confrimation payments system. One that makes bitcoin still can not beat paypal is because of this