Yes you are allowed to use PP up and PP Max... just use disgression in using them, seeing as they're in pretty low supply in FR/LG.
Also, just to clarify, TMs you can buy in Celadon department store count as items that would be needed to throw away, but TMs from the game corner do not. Basically, anything you can buy for basic money at some point in the game needs to be thrown out. Oh, and you need to empty out your PC too, no hoarding half your items in there to avoid losing them!
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