Paladins have a lot going for them and are one of the game's best damage absorbers. (argueably the Temple Knight is a better tank and lesser healer and control)
They are also the game's best overall PvE mob control with AoE Hate, AoE Root, Hate, Shield Stun, Root, AND UD.
Paladins are very hard to kill in PvE... even when massively outnumbered and outranked. "Their armor is thick and their shields broad... Even when their thick hides fail them, their control and healing will usually do just fine.
Paladin healing is usually massively underestimated. While paladins have slow and cumbersome standard mana -> healing spells, they are only part of the healing equation and are usually used for downtime healing anyway. The paladin's best ability is Sacrifice whice takes a nice chunk of their HP and gives it to another character. The use of this spell will give you but a taste of its power in its sheer HP transfer and base cast speed... but when you realize most parties will have a buffer who gives VR (melee damage = gain HP). The result is manaless healing at a price, which turns out to be simply time and some risk, both of which are minimized by smart playing.
Now, despite the paladin's skill at tanking, control, and healing, his offense is not that impressive.
This is understandable given his many defensive high points and indeed all he can really do for offense is his base melee (human str) and a couple weaker offensive attacks.
Balance would demand that a Paladin has a downside, and that downside should indeed be offense, and it is...
You must realize however, that L2 is ALL offense...
PvP and most PvE is based solely on stacking buffs and hitting for insane amounts of damage.
Given the damage output a single buffed archer can do, a tank of any kind is simply not required for most PvE encounters. Most well-tuned parties are literally 4-5 buffers and 3-4 archers.
PvP revolves around archers running around the battlefield one-hitting anyone not in heavy armor... note that the paladin is pretty good at holding his own. He does not die to one hit, and even the strongest archer takes awhile to nibble a paladin down... but the paladin has no teeth... The paladin will never kill the archer if the archer has a whit of sense to him. Given endgame equipment and buffs, the paladin is an annoyance factor that cannot be denied... but a threat? not really. Therein lies the biggest downside. The class the paladin was designed to have the biggest advantages against he actually doesn't have any except not dying in one hit like most other classes.
Magic tends to whittle a paladin down a tad faster (its supposed to) but once again a well-equipped paladin takes a bit to kill and has perhaps a snowball's chance in hell of actually killing the mage. Given that a mage is supposed to be the paladin's nemesis, this seems fair enough. I wouldn't mind seeing the paladin last a bit longer than they do currently however.
Against other melee, the paladin fairs relatively well... in fact, a little too well against warrior classes (which are supposed to beat them) and nowhere near as well as they should against dagger classes which paladins are supposed to have advantages against.
Frankly, a paladin is a great deal of fun to play in PvE, and a bit of a disappointment in PvP.
I expected to be hard to kill and have low but steady damage output... In PvE this is indeed the case, but in PvP, the sheer power of offense and how badly it trumps even the best defense pretty much sums up the biggest source of imbalance in this game. I am confident this will change.
Due to the ever-increasing amount of buffs the paladin has gotten lately, I'd say it is a good bet to start one now. Just be aware of what you are in for when you step on a battlefield. Offense and especially ranged and even more especially archery is so massively overpowered right now that you must be ready for it. Given that you are considering one of the game's best DEFENSIVE classes, you are currently giving up the most powerful aspect of gameplay in L2 at this moment in time. You are literally betting against the market... but that is not always a bad idea. :-)