Bitcoin is not competing with Paypal or Visa its competing with the US dollar. So in a sense the relationship between Bitcoin and Paypal is like the Trojan horse and Troy. If we get bitcoin inside paypal, then that will be a big blow to the US dollar.
This is exactly right! PayPal and Bitcoin can actually be the beginning of a beautiful friendship if PayPal starts offering/accepting Bitcoin as one of the methods of payment (both in and out). Even though that number will fluctuate constantly due to the volatility factor, people who choose to use it instead of USD (for instance) know that going in.