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We've used it almost from its inception and moved alot more than 1k at a time many times. Never had a problem in all these years. (Although until the FDIC went in to effect, we kept our bulk in the regular bank and drew from that)
Odds are most of the problems occur when people do not follow the rules or don't allow them a chk acct no. etc. They ARE a bank and if you don't trust THEM better get your $$ out and under your mattress.
When they legitimately lock an account for checking an odd movement of cash, they are protecting YOU. The brick and mortar bank down the street will do the same thing if all of a sudden some odd cash movement happens. Say you usually only pay utilities etc... then all of a sudden a check for 10 or 20k comes in... Guess what? Clang. Also they have your signature on file and can compare it to the check, so there are many more checks and balances in the brick bank than you ever know about. I used to move very large sums to other countries to purchase materials and they would call me to verify the check was real. Even having my and my ex's signatures on file. lol
Its just easier to deal with a brick and mortar since you can walk in and they see a person versus email or phone calls. If you don't want to give paypal the information they really need to not worry about the cash movements, then don't use them. Pay those high costs on wires. We will continue using paypal until such time that ebay messes them up, if that doesn't happen, they are the best way to make payments online cheaply.
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