So, it turns out that due to PayPal's API design for Standard Checkout, that you can only discount a cart up to the amount of the value of the items IN the cart.  Shipping costs cannot be covered by a cart discount.  So far, I haven't looked into how ExpressCheckout works, but I don't see it being any different.  Taxes probably fall into the same category.

That leaves it open as to how WebGUI is going to handle this.  Hacks have been suggested, where for PayPal, instead of using the handling_cart variable, you add it as another item in the cart.

The other option is to redesign how the Shop Credit works, where each Payment Driver says whether or not credit can be used to cover shipping and/or taxes, and to only subtract that much credit from the user's account on checkout.

I'm leaning toward the hack, but I like the idea of having more control in the PayDrivers for things, like whether or not a user has to provide billing credentials (not needed for PayPal since they have an account there and we can pull their billing info from there if necessary), or whether or not Shop credit can be used for all parts of the cart.

Thoughts, suggestions, random semi-related feedback?