I don't know about paypal, but I have helped our PTO set up a merchant account so we could accept credit cards for our auction. It's been a few years so the details are fuzzy, but I know we worked through a local representative. Now a days there are web-based merchant account providers too. If you go to the Bonus Tools page on this site, there's a spreadsheet that you can copy that shows a bunch of the standard credit card fees so you can compare the costs of several vendors. I remember there are some hidden costs that can add up. We finally cancelled our account after our auction since we were paying a $5 account maintenance fee each month and we really didnt' need the account again for 2 years.
I have no experience with this but I've seen the subject come up on other posts here on the PTO Today boards. Try "Search Message Boards" using paypal as your key word.
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I'm trying to figure out an inexpensive way for our group to accept credit cards. I don't want to subscribe to a company (verisign for example) I would rather use Paypal but I can't seem to find any groups that do this.