If you have free items in the cart you can't use paypal. I think you can replace the paypal link with a link to the checkout.php page and it should work. If you are going to support a combination of free and paid items in the cart it might need a bit of development to get it working properly. This is something I could help with in a premier support ticket.
Another option is to charge $0.01 instead of making it free. Paypal will accept small prices, just not free.