What's the best way to handle PayPal?

[Brian]

Chris, 
Are you aware that the PayPal generated QIF is inaccurate for
importing to GNUCash?  I'd recommend using Lloyd's Free
PayPal/Chase/BNCR CSV to QIF Online converter to get the PayPal
downloads properly converted to QIF and then import the results.  Also
you only want the PayPal Balance Affecting files, which you can download
from PayPal reports as the csv input.  Lloyd's converter will also
allow GNUCash to properly identify VAT/US Sales Tax as a liability and
not income.  Cheers, Brian Amundsen