In the beginning of this song, Stevie talks about two people wanting two different things: one is focused on the future, one on the past. I believe Stevie asking the "faces in the crowd" is a reference to the fact that so many of the aspects of her relationships have been played out in front of an audience. She moves on to the chorus "yesterday I was fascinated by somebody else." In this song, it seems Stevie is giving the shaft to Lindsey. He was the one whose "face fascinates" her (see Long Distance Winner) but now she's found someone else to interest her.
Since at this point Lindsey had left FM, maybe Stevie was being a little snarky. After all, "even if [he] did miss [her], [he] never let [her] know." She's accusing him of preferring to keep his emotional investment to a minimum - only allowing himself to be "a little" in love while keeping himself "a little bit" out of love at the same time, but she also admits that keeps him a little in and out of agony (the use of the word "agony" brings I'm So Afraid to mind, although I don't think that song had much to do with Stevie.)
Stevie states that she must continue on through the hard times, the "song must go on", with or without Lindsey. She seems hurt when she says that he's forgotten her, something she never wanted (see Silver Springs). Of course, that stemmed more from a desire to see him suffer because he couldn't forget her!
He tells her that they've become "mirrors of [their] former selves" (Lindsey at the time he left FM says he found Stevie unrecognizable, but even before then, Lindsey had observed she was changing for the worse in songs such as Without a Leg to Stand On - written way back in 1973 - and Shadow of the West). She counters that it's not her fault - Lindsey participated in that give-and-take right along with her. She admits that it might have been "off the wall" but she thinks they reflected each other, and didn't detract from each other.
As for the titular paper doll reference, I believe it refers to the fact that, with a paper doll, you dress her up to make her into what you want at the time. Maybe she feels Lindsey tried to change her to suit him and wouldn't let her make her own choices, be herself.
I was reading John's obsos about Stevie quoting Oscar Wilde in "Freedom" and "Kick It". She also quotes "The Picture of Dorian Grey" (as she does in "Freedom") in "Paper Doll" with the line "You like a man with a future/you like a woman with a past". The original line is "I like men who have a future and women who have a past." The line appears in Chapter 15; it is one of his best known quotations.
It sets the mood perfectly for this song which is so casual and upbeat on the surface but quite pithy and biting at the core. Both Stevie and Oscar Wilde are wonderful at (thinly) disguising the real emotion behind their words with humor and insight. Its obvious that he was a real inspiration to Stevie during the time the three songs were written. Personally I blame it on her "Wilde Heart" ::groan:: LOL
I can also picture Stevie doing a Wilde-esqe sneer while she sings the lines "You could have said no..." Just a thought and a bit of trivia I thought you might enjoy!
In one interview in 1989, Stevie says she was complaining to her father about some situation, and he told her, "You could have said 'No'." I think Stevie could have been referring to her father with that line.