A seller should never ask you to use Friends and Family. If they do, you have a good reason to be concerned.
On the other hand, if you know and trust someone, using F&F to pay them will save them a little.
It wasn't clear to me if it was even allowed to pay for merchandise using F&F, so I called PayPal a while back and asked if it is okay for us to use F&F to pay vendors. I was told that it is okay, but that we would be waiving the protections on purchases that PayPal normally provides. One of our vendors, however, has asked that we not use F&F because they were told by PayPal not to accept it for sales payments. I think that the real policy is that vendors can't request that payments are made by F&F. That makes sense because a seller should not ask the buyer to waive protections offered by PayPal.