I've got my palandin up to lvl32 at this point. You can tank just fine with a Paladin, just make sure you have a shield for the grouping situations, it'll keep you alive in large group battles when your DPS isn't important.
DSP for a Paladin is low, just like all the other fighter types. You will have a couple of nukes and a few heals, but overall you aren't playing a DPS character. For solo play, switch to a 2 handed weapon and get that offensive stance in place, then you'll do just fine.
Soloing a Paldin is quite satisfying for me. It takes longer to kill the mobs but as long as you've got the best armor available, you should be able to stand toe to toe with appropriately sized mobs.
Sorry, I can't compare to FFXI and WoW.