I enjoy Papers 1 pretty much every day. My main gripe with Paper 1 is the poor BibTex export feature. I always end up having to correct 75% of every BibTex file created by Papers 1, because it insists on using @article and abbreviates journal names and institutions inappropriately.
If I may piggy-back on this thread, has this issue been resolved in Papers 2? I did try Papers 2 when it first came out and did not notice an improvement. Supposedly, the media handling (i.e. presentations coupled with PDFs) has improved too... if the BibTex issue has been resolved, I would definitely switch.
Thanks and good luck!