1) Not a problem. A couple users had magic quotes which required an extra line of code (which was added).
2) Yes, usergroups are assigned permissions on a per category basis (as well as other options).
3) Photopost can handle unlimited number of subalbums within subalbums.
4) Users can create their own subalbums within their members galleries, but not subalbums of subalbums.
5) All integrations are done at the member table level - meaning we do not maintain our own member table, we access the forum tables directly.
6) We don't have PayPal integration (yet) as it has not been an option in big demand. I did document a hack for this and published it in the Hacks area, but not many people were interested in it. I use PhotoPost/PayPal to add more levels of disk space automatically on several of my sites.
7) Not a problem at all. We have some HUGE sites.
9) Yes, you can specify a browser safe medium image AND you can resize the original down to an acceptable level.
10) Using the bulkupload feature you could do entire categories at a time.
I hope this helps. PayPal is an easy integration and the documented hack should suffice in being able to what you want it to do, but its not part of the official script at this time. If you are comfortable with a little coding work, you shouldnt have any problems.
PhotoPost has many advantages over Albinator. PhotoPost has been around much longer and has a much larger installed userbase - not to mention innovated many of the features you see in gallery software today.
Please do not PM me for support or sales questions. Thank you for your understanding.