Associating your PayPal account with Xbox.com is "pretty easy" informs Major Nelson, it's "just like adding a credit card" in fact. However this service is "not available" on the consoles.
"If you are in the United States, you can now use PayPal as a method of payment for the Xbox LIVE Marketplace," the Major. "You can use PayPal to buy Microsoft Points without having to associate your credit card information to your Xbox LIVE account."
You can link multiple PayPal accounts but it doesn't work through the consoles themselves, it must be done through the US Xbox.com website to buy Microsoft Points.
Remember: American only, no Euro trash or other foreign types, yet.