Paper napkins aren't quite as durable as paper towels.
We only use napkins (and yes, for daily use, we use paper--I actually prefer them in terms of function) at the dinner table. And since we set the table with them, they are there, so nobody goes to get a paper towel. I also prefer to have 2, since the ones we use are thinner. (I don't like the thicker, "dressier" paper napkins, because they're too smooth, less absorbent, and I don't like the thickness. I'd rather just use an extra paper one when I need it.)
We use paper towels for other things (messes, sometimes on face and hands, if it's not a mealtime).
I use cloth napkins when we're entertaining, but I really don't like them. They're thick, they're not absorbent, etc.