Actually, DA uses paper for capturing notes (legal pads during the day, the 'evening module' pocket-sized pads during dinners, etc.) He says on the FAST tapes that it's a lot more efficient to capture notes on paper than trying to digitize raw info.
Plus that way you can better distinguish between capturing and processing.
Either way, it comes down to what works for you. The paper/PDA question tends to inspire spirited debates among GTD users.