Here's a quote from the Server Integration Protocol Documents:
Sage Pay’s Server integration provides a secure, simple means of authorising credit and debit card transactions from your website. In addition, you can accept payments via PayPal...
There is nothing in any public SagePay documentation that says clearly that you can't use PayPal with the Server iFrame integration.
One of the main selling points of the Server integration is that it can be used in an iframe on the customer's site, and if PayPal cannot be integrated via SagePay server in an iFrame then this should be made clear at the point where the docs say that the Server Integration allows PayPal integration.
