If this is such great news, then why the drop in BTC price? Granted, the volume is low, so it could mean that people are waiting to decide what to do.. but you would think that there would have been a price spike, but we got the opposite...
It may depend on how they implement the system. If it automatically converts to fiat, then it's not a good news in the short term. For bitcoin to work, everyone needs to accept bitcoin, e.g. You can pay your suppliers with bitcoin, people take bitcoin as a part of their salary. Paypal could very well make or break bitcoin, depending on the public adoption.