You really have two choices as far as how much to pay a writer:
1) Open a project for bidding - this clearly only works if you don't already have a writer in mind
2) Negotiate a price per word
You might think option #2 will allow the writer to fluff his piece but you control the word count and you actually pay on the edited content and you control the editing, so you're really the one in control. As far as price per work, thin $0.25 - $0.50 per work, depending on the quality you want.
If you pay well, you're likely to get writers to stick around and keep writing for you - you'll also end up with fairly consistent quality. Pay poorly and you'll be stuck with bidders and you might get wildly different writing qualities, which can affect your blog.
Only you know where you need to be but this should get you started.
You can use any acceptable payment method: PayPal, writing check or using some freelance site as middle men. As for how much, you question have no answer.