We've had no problems with PayPal but we accept payments primarily via CreditCard with WebsitePayments Pro... That and we manually verify every order + automatically verify as well...
When I had webhosting business in a whole 6 months I got a single chargeback because of unauthorized transaction (stolen paypal account) other than that web hosting clients won't usually chargeback because it is a recurring service so if they chargeback they get the service terminated and this is no good for their sites. But delivering downloads should be different
Hosting is actually very common to have fraudulent transactions, usually not by actual customers but by stolen accounts. Spammers/hackers will use the service to send out spam with a stolen account.