Jim, you ask: "If someone sends me $ Paypal family and friends no ebay item, how do I generate a mailing label? "

Answer: you can't generate a shipping label from that transaction alone. There is no link to click to generate the shipping label. I assume that PayPal planned it that way, to discourage false/dishonest no-fee family and friends payments. If the payment is a gift, generally there is no reason to ship them anything.

When you get a family-friend PayPal payment, you can -- some choices:
1. put postage stamps on the parcel (but no tracking).
2. go to the post office clerk or to the 24-hour-Automated-Postal-Center at the post office.
3. use PayPal's "Create Your Shipping Label":
https://www.paypal.com/?cmd=_ship-now
4. you could also ask them pay you $1 for an eBay listing designed just for them,.... or better yet, I think, send them a $1 PayPal invoice to pay. The links from those will let you generate shipping labels.

Robert