If you are buying a product and you use the friends and family option, that's dishonest. Period. I won't do it. I also won't buy from someone who wants payment that way. What else will they lie about?
My opinion is this is not dishonest at all. The 3% is the purchase of insurance. If you don't choose to buy the insurance, then send as a "gift/friend".
I have bought many things from FABO (even though my feedback score doesn't reflect it) and never have been scammed. Most of my transactions have not been a lot of money, and I've sent as a "friend" because that's how I see most of this site. I chose not to buy PayPal's insurance. That's how I see it anyways.
Trust me, Paypal makes a lot of money off of what I've sold on ebay, and continue to sell.