People who have customer service nightmares with Paypal are generally doing something that no other payment processor would touch. I hear complaints from people who have been accepting pre-orders of a game or pre-registration for a conference, which is obviously a massive risk for a payment processor. If you found a merchant account provider willing to take such risky business, they'd demand a huge deposit and charge well above the odds.
Paypal provide an absolutely exceptional service in allowing pretty much anyone to accept card payments without a great deal of fuss. The flipside of this is that they have to deal with risky accounts retroactively, which means they have little choice but to freeze accounts that set off their fraud detection algoritms. If you prefer to know where you stand, apply for a merchant account - in most of the world, that will involve a long, expensive vetting process.
People continue to use Paypal because for many use cases, there aren't any better alternatives. This isn't because Paypal or the card companies are abusing monopoly power, but because payment processing is hard and fraud is expensive.