1. Paypal fees - Artists, please don't ask your buyers to cover your paypal fees. It is against their TOS, and yes, you can have your account frozen if they find out what you are doing. The cost of the fee is something you should be factoring into your commission prices. When you start drawing for money, you are officially a business, and the fees are simply a part of your overhead.
It is legal to charge your customer the cost of the fee. This is the cost of doing business with paypal, and is a part of your business expense. But the moment someone says "The cost is $8.00 but please add $0.60 to cover the fee" or "Please send me $8.00 using the friends & family gift option", Paypal's merchant TOS is being broken.
2. Sending/receiving payments as gifts - Paypal is also known to freeze accounts that receive too many payments as gifts, because that is a very common way for people to skirt the fees. Unless you trust the person you are doing business with, I would avoid using the gift option. If something goes wrong then you cannot dispute the transaction if you send the payment as a gift. Even if the person you are doing business with is a friend, I would still avoid this option. A friendship should not negate the fact that this is a business transaction.
3. Goods and Services - If you do digital art and you don't physically ship anything to your buyer, the payment should be labeled as a Service rather than Goods. The problem is on Paypal's end, and is not the fault of the artist or the buyer. But they seem to require that something is physically shipped if the money was sent for Goods. I tend to pay for all my commissions as a Service because... well, it seems obvious doesn't it? If someone is making custom artwork for me, then they are performing a Service. But if I were to buy some jewelry, then I would label the payment as Goods.
Personally, I like sending/receiving invoices through Paypal. That way, the artist is in charge of labeling the transaction as Goods or Services, and making sure the money is sent in the correct denomination, etc. It protects the artist, and it's less hassle and confusion for the client.
I hope this was helpful!