Still my question is, if I have paired my iPad to a bluetooth gps receiver, when I connect to PAW where will my iPad gets its position from for my own aircraft to display in sky demon and where will it derive its gps position in order to broadcast to others over ADSB? bluetooth or PAW gps dongle ?
It'll get it from the PAW GPS dongle if you select "Use FLARM" in Sky Demon. (wasn't this answered further up?

) The PAW will get the position from the dongle too. If you select "Use position services" in Sky Demon it'll use the internal iPad or bluetooth GPS, but you won't get any traffic.
While I appreciate the benefits of one device providing both - so they are both on a level playing field so to speak, I would much prefer the accuracy and speed of the garmin to provide at least the location of me on the SD app even if the iPad uses the position provided by the PAW gps to broadcast to others via the ADSB.
This would be up to Sky Demon to implement, talk to Tim Dawson. I know in some other software (Easy VFR?) you can choose to take the position data from the bluetooth GPS/internal GPS and the traffic from the FLARM/PAW, but Sky Demon doesn't do that.
In terms of accuracy you won't find much difference between the Garmin and the dongle, they are both WAAS/EGNOS GPS receivers, so it's just the speed that's the issue.
If you want to make things complicated, and Lee still allows it in the PAW software, you can send the GPS position from the iPad to the PAW using an App called NMEA GPS I believe, but it introduces another two levels of unreliability into the equation. I wouldn't recommend it in a non-experimental setup.
The other thing is if the Garmin GPS has NMEA out on an RS232, you could feed this into an RS232/USB converter and feed the PAW with that, that's a PAW configuration option. I hav no idea what the refresh rate sent over the RS232 is though.