Splitting cost between Microsoft Currency and Paypal

Purchase the item on the console and before the purchase goes through it will ask you if you want to apply the currency you have on your account.

Can I split payment between my local currency and a credit card?

Yes. For most purchases, if the amount of local currency in your Microsoft account is not sufficient to pay for the content, you can charge the remainder to your credit card or PayPal account. PayPal availability varies by region. However, you must first
select to purchase using your credit card or Paypal account and then you will see the option to use the remaining currency in your account.

***Split payment may not be an option for all content purchases.***

Straight from the currency transition FAQ - http://support.xbox.com/en-US/billing/microsoft-points/microsoft-points-retire-faq



Can I split payment between my local currency and a credit card?

Yes. For most purchases, if the amount of local currency in your Microsoft account is not sufficient to pay for the content, you can charge the remainder to your credit card or PayPal account. PayPal availability varies by region. However, you must first
select to purchase using your credit card or PayPal account and then you will see the option to use the remaining currency in your account. Split payment may not be an option for all content purchases.

If you see the MSA funds greyed out when selecting the other methods, that is the process.

Can I split payment between my local currency and a credit card?

Yes. For most purchases, if the amount of local currency in your Microsoft account is not sufficient to pay for the content, you can charge the remainder to your credit card or PayPal account. PayPal availability varies by region. However, you must first
select to purchase using your credit card or PayPal account, and then you will see the option to use the remaining currency in your account. Split payment may not be an option for all content purchases.

source:
support.xbox.com/.../microsoft-points-retire-faq

You sure can split the difference, but you have to do it from your console. As outlined here:

support.xbox.com/.../microsoft-points-retire-faq

"Can I split payment between my local currency and a credit card?

Yes, if the amount of local currency in your Microsoft account is not sufficient to pay for the content, you can charge the remainder to your credit card or Paypal account (Paypal availability varies by region). However, you must first select to purchase
using your credit card or Paypal account and then you will see the option to use the remaining currency in your account."

So yeah, it's not very obvious, but the process is quite simple.