Is Bitcoin a threat or competitor to Paypal? Is this the reason that very few websites support purchasing BTC via Paypal?
Unlike PayPal payments, Bitcoin payments are not reversible. PayPal payments are reversible up to 60 days.
Accepting PayPal payments to pay for bitcoins exposes your service to a stolen credit card fraud and PayPal friendly fraud
The fraudulent buyer makes the payment in PayPal, then the payment is disputed few days after the buyer received the bitcoins. When the PayPal payment is disputed, the seller of bitcoin is left without 1) bitcoins 2) fiat currency payment
Because PayPal is somewhat hostile towards using their payment service for selling virtual currencies, the bitcoin seller has little or no means to combat against fraudulent payments or disputed when accepting PayPal payments
Thus, the result is that running a profitable bitcoin selling business which accepts PayPal payments is difficult, though not outright impossible. Thus, all bitcoin sellers who accept PayPal have very high risk premiums.
Bitcoin is threat to the PayPal business in the sense that PayPal is global dominating online payment solution and bitcoin could replace PayPal payments in many scenarios, like ordering items online internationally or remittance (sending money to your foreign friends).
Bitcoin may be a threat to Paypal someday (hopefully soon!), but due to the current technical know-how, the majority of users are more comfortable with services like PP than they are BTC.
I don't know any service (outside of localbitcoins) that will sell you Bitcoins for Paypal directly, but there are some roundabout methods. Virwox will let you exchange paypal for linden bucks, then lindens for Bitcoins (~30% premium). Alternatively, you can buy an Amazon gift card from Gyft.com and then use that credit to buy wishlists from amz2bitcoin (~15% premium). They're not direct, but they get the job done.