1. I'm a simple 'peronal' account holder. Can I *receive* funds without paying a fee?

Yes, as long as you don't receive funds from a credit card. You need to specify to whoever's paying you that you only accept "cash" transfers from other PayPal accounts with cash in them, or checks coming from their checking account via PayPal. I am pretty sure PayPal tells them that when they submit payment.

2. Does it cost to transfer funds to my bank account? I'm in UK

Not sure about UK, but in the U.S., it doesn't cost anything to deposit funds. That would be a pretty bad deal if they charged just to take your money.

Since eBay bought them, has the CS improved? I remember paypal used to freeze funds etc! Has this got better or is it best to transfer funds immediatley?

I think PayPal only froze the funds of suspected terrorists. Seriously though, I have heard horror stories about PayPal, but I've never really had problems with my assets being frozen or anything. And I was around during the pre-Ebay years.