And at some point you had to go through the vetting process with PayPal. When I signed on, I had to verify a micro transaction into my account (years ago, dunno about today) in addition to the traditional forms. And, of course, I thought about whether or not I trusted PayPal for a while before I took the plunge. There's baggage with every system at some point. Clearing the initial inconvenience is one of the biggest steps because it affords the user time to reconsider.
Pretty much everyone who buys things on the Internet has a Paypal account.
You may as well say that the inconvenience of opening a bank account is too much baggage for people to use Paypal, except pretty much everyone who wants to use Paypal already has a bank account.
You are correct that trying to get users to put CC details in to pay a "microtransaction" will put people off, but there are plenty of convenient (two - three click) payment processes that already have huge amounts of users.
No, you can click on a button and get a redirect to Paypal, where you then enter your Paypal password and hit "confirm".
Paypal's whole business model is based around making transactions like this convenient and easy (for the payer).