Using Paper in GtD
There are threads on Paper-only systems and a DA Tip on how to set one up.
There was a recent poll here that showed the majority of GtD'ers using an electronic system.
Some people have decided that the electronic system is good for organization and reference, but Paper lends itself better to right-brain work (planning, on-the-fly notes, mindmaps, etc.) From the posts, it's clear that each person who uses Paper does so to different degrees. Most commonly for these people, I think, the organization of lists is electronic, and then daily journalling (and sometimes also daily schedulling) is on Paper.
The way I do it is to use the Palm as reference and carry a simple notepad for my daily activities. When I am working (Doing), I use the notepad. Writing the task down personalizes and focuses the task at hand (and focuses the context away from the electronic system, which can be a distraction) and the notepad maintains a continuous record of the day's activities on the tasks, so you can avoid having to go back into the electronic system every time there is an update to a task (e.g., WF Callback and then you receive a Callback soon after, or NA Send Mail and then you send the mail soon after). At certain times (perhaps the end of the day, or before lunch and the end of the day), the notepad becomes an Inbox for Processing the relevant entries into the electronic system (the Call Notes or the fact that a particular Mail communication was completed). I like to throw the notepad pages away after processing and start afresh the next day; some people keep them as a journal for a few days yo be available for lookback.
HTH
Andrew