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I am starting to get higher rate of fraud and with GC's $10 fee for each fraud case, it's getting expensive.

Is there any way enable Google Checkout for selected products only?

You might consider using Buy Now buttons, which bypass our shopping cart and take buyers directly to instant checkout with a predetermined payment processor to order just one item at a time. Thus, for some items you could offer Buy Now buttons for both PayPal and Google Checkout, while other items could only have Buy Now buttons for PayPal.

Bear in mind that Buy Now buttons cannot use features which depend on our cart, such as tax/shipping calculation and certain discount settings -- see fuller details here:
http://www.e-junkie.com/ej/help.buttons.buy-now.htm