First of all, when listing you want to choose "no shipping: Local pickup only" in the shipping section. It is in the drop down box. You also want to put that in the description and you could put local pickup in the title even. Then in the section for paying (with the paypal logo) you want to click on "add or remove options" in blue and choose:
Other payment methods
Receive payment upon pickup
You should also put that in the description. You only want to accept cash upon pickup. If you do paypal, then you won't have any online proof of delivery because you aren't shipping. They could pay you and take the item - then go home and file a claim for item not received and you couldn't prove delivery and paypal would refund them. you could also have them sign a receipt, if you want.
Sellers who offer payment upon pickup may
include the following statement in their listings: "Contact me for payment methods to pay on pickup."
http://pages.ebay.com/help/policies/accepted-payments-policy.html