I have been seeing this issue raised again and again on this discussion board, and I'm seeing a lot of people who are confused by the terms.
USPS rates and rules are complicated, and I am not sure that everyone understands what the "small item sellers" are fussing about.
Let's talk dollars and cents. Here are the postage costs for different ways of shipping a small, lightweight item (one ounce or less) by USPS first class mail:
1) Letter size envelope---------------------------------------------$0.45
2) Non-machinable letter size envelope----------------------$0.65
3) 6" x 9" bubble mailer sent as a "flat" -------------------- $0.90
4) 6" x 9" bubble mailer sent as a "parcel"-----------------$1.64
The problem is that you cannot print out labels for letter sized envelopes or flats- not through Ebay Shipping; not through Paypal shipping; not even on the USPS site. To the best of my knowledge, we can only get these advantageous rates by using stamps.
If we had the option of printing labels for these less expensive envelopes, this particular problem would disappear.