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Based on the code, it appears the inability to ungroup a hidden block type is expected behavior. When we hide the Paywall block to disable insertion via the block inserter or slash inserter, it also disables ungrouping the Paywall block (via replacing) as it is now included in the hiddenBlockTypes.
Ungrouping the Paywall block, in a way, would result in inserting the block to the root post. I believe this is why this behavior is expected.
Steps to Reproduce
Expected Outcome
The Paywall block is no longer a child of the Group block, but a sibling.
Actual Outcome
The Paywall block remains a child of the Group block.
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