I've been using e-gold for about 3 years almost on daily basis and had no problems (except few days when e-gold was under ddos attacks or so - I couldn't access my accounts). I have few e-gold accounts (e-gold allows to have multiple accounts) and none of them were hacked. Yes, I heard about people losing their e-gold money due to hackers, but in most cases that's their fault - they use the same password for e-gold as for other sites, they don't use security features provided by e-gold, they don't have any firewalls on their PCs or they use insecure e-mail services.
I use http://icegold.com services to exchange my e-gold. Icegold is very good for e-gold users from baltic countries since they have bank accounts here, so you get your money fast and exchange fee is very low. I don't know about other countries, but as far as I know there are many sites where you can exchange your e-gold.
But if PayPal does catch you (usually when people put something obvious like "E-Gold Exchange" in the payment note) they WILL freeze your account along with the person you're trading with.