Funds will be exchanged instantly, and will remain in your Paypal account until you transfer it to your bank account. Its perfectly safe there
A few words of warnings about paypal.
I do alot of business on ebay and used paypal for a couple of years with well over 2000 paypal transactions in this period.
First problem was my paypal account being hacked and a nice man from eastern europe spending £1100 on my account's registered credit card.As it was a credit card I got the money back from the card company,if it had been a debit card, bye bye money.
Rule 1 always have a credit card with a very low limit registered to paypal,never a bank debit card or worse still your bank account registered with them.
Problem 2 If someone pays you with a duff card or someone puts in a dispute notice on a transaction your account is frozen and it takes months to sort out. I was in a situation when some scrote put in a dispute saying I hadn't dispatched £30s worth of goods,result my account was frozen for 6 weeks with a ballance of £900 locked in it.
Rule 2 Always sweep your paypal account ballance into your bank account leave nothing in it to get frozen or stolen by hackers
Problem 3 Last year I transfered 3 amounts from paypal into my bank account over 3 days at the end of June 2005.The sum involed was over £5500,the money didn't hit my bank account.To say paypal were unhelful is an understatement.It took me until December 2005 to get the money credited,I never received an explanation or apology and only got the money because I refered the matter to the FSA ombudsman.
My rule 3 don't touch paypal with a very long pole:D.