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Paying contractors is not breaking their rules at the moment as I've read it. You are paying someone for sending traffic, not paying someone for a truly adult product. Now it's entirely possible that this could change with no notice, perhaps they are unaware of how many companies offer Paypal as a payout method to the resellers.
I think it's smart for programs to offer as many methods of payment as they can to their affiliates, just like it's wise to accept as many methods of payment for what you are selling.
The biggest thing with Paypal is their inclination to freeze accounts first, and ask questions later. Their support is laughable when this happens and their communication with their clients on the matter is about as bad...
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