>>Not too sure about XSL-FO. It looks like more on server side kind of solution (web-based / services).
I'm not sure where you got that impression. When you use the XSL-FO method, PowerBuilder generates an XSL-FO file from the datawindow and then runs FOP (a java utility) on it locally to generate the PBD.
>>Powerbuilder provides native support?
As in providing support through Ghostscript or XSL-FO.