Hi Oaks,
In order to use Auctiva Checkout to accept Paypal payments, leave the box next to "Use Auctiva Checkout" selected.
Then, when creating the "Checkout Options" section of your listings, be sure to check the box next to "Accept Paypal Payments" and enter your Paypal email address in the "Paypal Notification Will To:" field.
This will allow the buyer of that item to pay via Paypal through the Auctiva Checkout system.
-Mike