I have spent quite a lot of time talking about Clerics lately. They are one of my favorite classes to play, if not my favorite.
Recently, I was talking with some folks who asked about the Paladin and if they weren't basically the same thing.
Here's my take on the situation.
Clerics, as per the Players Handbook, are essentially like the Knights Templar. Clerics have pretty much one commander and that is their deity. They have little to do with Kings or other forms of hierarchy. This makes them a bit one track minded.
Paladins on the other hand, are what I liken to the Knights of the Round Table. While they do hold their deity above all, they make room to recognize King and Country. Because of this divided allegiance, they have less clerical ability.
As a matter of fact, Paladins, BtB are made to depend on Clerics to a certain degree. For example, if they should ever do something out of alignment, especially something "Chaotic" (remember that Paladins can only be Lawful Good in alignment), they must seek out a Cleric to give them penance or they risk losing Paladin status. If they knowingly, intentionally do Evil, they lose Paladin-hood for good.
They are able to perform limited Clerical spells, thus they will be required to learn from Clerics in order to train to level up.
Of special interest, and I relate this to how I use Paladins myself, is that Paladins do NOT accumulate men-at-arms as other fighters/PC's do. They can have henchmen though. Though when I use them, I don't give them any. They are the henchmen in my eyes. Though, I can see them as being sent out on a quest or mission with a select group on request (or demand) of his liege. Especially if said liege doesn't fully trust the rest of the group to be 100% loyal to his wants. The Paladin makes for a good agent of the liege in such a case. Usually the Paladin in question is sent as an NPC in such a case.
I only use Paladins as Henchmen or Men-At-Arms for Clerics in games. While the Cleric is a knight of a sort and can do battle, their focus is on leading the righteous battle and bringing the wrath of their deity down on the enemy.
As the henchman of a Cleric, a Paladin can fit in perfectly by having a Cleric to look over them, to train them and to provide them the guidance/direction as the need to confess and do penance would indicate.
You can certainly use a Paladin on their own and in other situations but, BtB, they are very limited as to their adventuring abilities with mixed groups and such.
As for the Cleric with Paladin Men-At-Arms, talk about an awesome presence going into battle or going on a quest. Nearly the best right hand men you can have as a Cleric plus adding in some others to round out a party. A regular fighter, a Magic User and/or Illusionist. An epic adventure is in the works for that group.