Create an Android PhoneGap project. Details at http://www.mobiledevelopersolutions.com/home/start
Put PayPal_MPL.jar into your project's libs directory and add it to the build path. In Eclipse, right click on PayPal_MPL.jar and select Add to Build Path.
Copy assets/www/ files into your project's assets/www/ directory
Copy src/com/phonegap/plugin/ files into your project's src/com/phonegap/plugin/ directory
Make sure your AndroidManifest.xml includes a superset of the permissions shown in the reference AndroidManifest.xml
Add the com.paypal.android.MEP.PayPalActivity as shown in the reference AndroidManifest.xml
Make sure the phonegap.{version}.js filename in index.html matches the filename in your www directory.
Deploy and test the app. The default environment is ENV_NONE.

Using the PayPal Sandbox

Set up a PayPal buyer and seller sandbox account from https://developer.paypal.com/
Update demo.js to use ENV_SANDBOX instead of ENV_NONE. See comments near bottom of demo.js
In index.html, update the pmt_recipient field to your sandbox seller account

RELEASE NOTES

Initial release
By default the PayPalPlugin-Host runs in ENV_NONE (offline) with a dummy PayPal ID. Change to ENV_SANDBOX or ENV_LIVE
Only tested with ENV_NONE and ENV_SANDBOX
The default payment type is HARD_GOODS. Change initializeMPL method in demo.js to one of the PayPalPaymentType's listed at the bottom of paypal.js
For API docs, see the assets/www/paypal.js. For sample code, see assets/www/demo.js and assets/www/index.html.

Patches welcome! Send a pull request. Since this is not a part of PhoneGap Core (which requires a CLA), this should be easier.

Post issues in the PhoneGap Google Groups, include in the subject heading - "PayPalPlugin" or on Github (preferred)