If you have digestion issues, which most people do at first, then dairy probably isn't the best choices unless its raw, grass fed. My experience with hard cheese is that consumption of it is never a bit. You're allowed to do what you want to do. I wasn't able single cheese out as causing me troubles. But I did see milk and yogurt cause me problems so I cut out the cheese for a while. Hopefully, I'll be able to eat it again some day. That day is not now.
Butter and cream are more often allowed because they're mostly fat with a few milk solids. Not much lactose, not much casein, not much whey (which is the odd trouble maker for me, isolate powder puts me to shame.). People will also talk about A1 versus A2 cattle breeds. Test it out for yourself. Milk is a highly individual issue.
I find things like butter and hard cheeses do not have any effect on me, and so I eat a lot of them. Now soft cheeses and yoghurt...I do not suffer GI issues but they seem to give me cravings for other 'borderline' items. Cream seems to be OK.
I like Dr. Kurt Harris' reasoning that we are not after paleolithic re-enactment - more that we are re-creating the specific nutritional benefits of such a diet with modern day food items like butter and cream.
The low carb forms of dairy like butter, drained yogurt, hard cheese, cream cheese, sour cream, etc. don't cause me any problems, so I eat them. But I avoid the higher carb forms of dairy like milk, undrained yogurt and kefir, etc. because they cause me to gain weight very rapidly. The problem for me seems to be the whey because that's where the carbs are...in the whey.
I think one important concept of Paleo is that different things work for different people, and you need to work out what works for you.
I would suggest eliminating dairy completely for maybe 30 days and then introducing different forms of dairy back in and see if they cause problems. Ideally the dairy would be from grassfed sources.
Personally I do ok with butter, but cream gives me sinus problems and pressure in my ears. I also do ok with most hard cheeses, but soft cheeses give me digestive problems.
This is indirectly related to your question - you mentioned two authors only. Many folks (not everyone) on these boards consider Cordain and DeVany to be misguided in their fear of fat. To get more balance, I suggest Wolf and Sisson for books, and absolutely read Kurt Harris' blog PaNu.
I drink heavy cream with my coffee. I also have a few gulps of heavy cream after a meal. I also cook with butter. And I enjoy hard cheeses. I don't seem to have any digestion or weight-gain problems regarding these types of dairy.
organic butter and heavy cream are staples in my diet. raw milk is great too. and i eat hard cheeses several times a week. if you are not sensitive to lactose/casein then there is no need to exclude dairy from your diet. if you are sensitive to lactose/casein, you should still be able to eat hard cheeses and definitely ghee.
Milk and dairy are not strictly paleo: they have a neolithic origin as food staples. Nevertheless heavy cream and butter are recommended by K. Harris since they do not contain much lactose or casein the two problematic substances in milk. Also fermented milk-yoghurt is accepted by many here. There are other foods such as coffee, avocados, sweet potatoes or olive oil that, although they are not strictly paleo are accepted or liked by many of us, on the basis of its positive health effects.
I do well with Horizon whole milk (with added DHA), my husband and I are both lactose intolerant, and we have tried lactose-free milk and even soy milk and almond milk but none of it sits well with us. then we decided to go for the organic Horizon brand milk and we both agree that its easy on our stomachs and is very satisfying.
I drink Horizon milk and eat greek yogurt and cottage cheese on a weekly basis, all other kinds of dairy cheeses and such I eat every once in a while. at the moment I am pregnant and the hoprizon milk, greek yogurt and cottage cheese helps me to meet my daily protein recommendation, which I have tried to meet without the dairy products and I found that I became very constipated with the amount of nuts and meat that I had to eat. so this way works for me :)