I don't see anything wrong. They set it up that way, that when sending money to family and friends from a bank account there is no fee.
How is it cheating the system?
Just to be clear, I did not say he was cheating the system.
The OP wants to use what paypal designed as gift giving (AFAIK), to get paid for services rendered.
I have not used PP in a long time, so perhaps my memory is wrong.