Yeah, PayPal should work on SPay the same way it works online. Not sure why your PayPal debit card isn't working though, but if it fails 'in real life', it'll probably fail on SPay too, so that's something that PayPal needs to fix.
The 'beauty' here is that you get everything when using Samsung Pay: Any PayPal-specific promos, any cashback or points from your card, any location-specific deals like 'Purchase this much here and get so much back' (something you DON'T get when using PayPal directly as the card sees the purchase location as PayPal, not the actual establishment), AND Samsung Rewards for using SPay. Neat!