If by "dummy" you mean put under an assumed name and fake information than yes, VERY illegal. If youre talking about just a separate account for Paypal with your real information and everything than no....but than its not really a dummy account and your information, credit, and money is still at risk so theres really no point. Paypal is safe. Millions of people use it and trust it and statistically the safest way to pay for something online.
Do you live in the USA? If you're talking about creating a separate bank account to deposit income from your art business, that's not only 100% legal, but the IRS prefers it. Just don't use a dummy name. If you don't have a business name yet, call it something like YourFirstName's Art.
Using real details is fine, but the bank may not be exactly happy about someone having an account that is both inactive and with little to nothing in it most of the time. They might also get suspicious when you use it to transfer money. The best thing to do is talk to your bank about dealing with a fraud transaction instead of making a dummy account.
you can always get a card which you add money when you need it. I got it and use it here and there. there's a small fee but that's about as much as an interest on a credit card would be. and there's also some which have no fees and others which act more like a bank account. it is another option than opening another bank account.
If you don't want to have the money transferredf from PayPal to your own bank account, then you can always leave it in PayPal as an account balance. Otherwise, you will need to have a bank account into which you can transfer the money. I am curious as to why you wouldn't trust Paypal, though?
I get the reason - my father's spent a lot of time cramming the evil of paypal down my throat! xD Not sure how much of a real concern it is though.
Apparently there's something in the agreement that says they can freeze your BANK ACCOUNT if they see what they think is fraudulent activity in your paypal account, and I've heard they miss the mark and tag a number of activities fraudulent by mistake.