First let me say that I'm an accountant, so you don't think that I'm blowing smoke.
Payroll services are fairly inexpensive, especially for a small number of employees.
The main advantage of a payroll service is that they do all of your quarterly returns. They keep a running tab of your weekly payroll also. All that you have to do is call in and tell them each employees hours and rate and they figure it all out for you. They are really great.
As for quickbooks. We are setting up a lot of our smaller clients up on QB 2000 or 2001. It is really a user friendly program that is very good for the small business owner who want's to take control of their business.
If you have any questions please feel free to email me.