Mana efficiency is only a problem for a priest if they suck or don't have the brains to work on their MP5.
I liked paladins. I was never jealous of them or felt threatened by them. In fact, the most successful arena team I was on was a 3v3 with myself, a holy paladin and an elemental shaman. The paladin handled the single target heals, my PoM bounced between all three of us constantly, I had a fearbomb and the shaman did the killing. Now, generally an arena team is going to choose a paladin over a priest if they are only going to use one healer spot. That's not the fault of the priest, nor the fault of the paladin. It's the fault of the devs being too stupid to make holy and holy/disc priests more viable in arena combat.
I've done arena as both shadow and as holy, and it really doesn't matter because I am going to be targeted first regardless of whether I'm a healer or a dpser.
Trust me though, PoM is a seriously awesome spell both in PvE and PvP. It's also extremely rare, at least in my experience, for a raid to not bring at least one holy/disc priest along for the divine spirit buff.
Each healing class heals differently. You can't say "this class heals better than this other class" because each one does so in a different way. It's a matter of how the player plays, the player's gear and the player's spec.
TBC shook things up as far as the healing roles go in the game, but it didn't make priests automatically become mana batteries for paladins, despite what the QQing on the forums said. I never once lost a raid spot to a paladin, and if a priest did they most likely sucked or their guild had too many healers and needed to create an additional raid group.
Also keep in mind the serious problems concerning threat generation/reduction when it comes to a shadow build. You have to walk an extremely fine line between maxing your dps and watching your threat. One SWD crit and you're quite possibly a smear on the floor, and fade is a piece of shit.
Edit: I just remembered, it's almost caturday.