.htaccess to PayPal & PayPal Sandbox

<Files filename> only apply to a filename, you cannot use a path with it.

The Files directive documentation states:

The directives given within this section will be applied to any object with a basename (last component of filename) matching the specified filename.

Possible Solution:

In the directory admin/paypal, create an .htaccess with:

<Files notify.php>
  Order Deny,Allow
  Deny from All
  Allow from paypal.com
</Files>

Edit: reversed Deny and Allow.

I don't think the problem is in the SEO part.

Your first RewriteRule is broken. The syntax is:

RewriteRule pattern substitution [flags]

and I think that you want a second RewriteCond to check if the URI being requested has "administration" in it. So something like:

# Condition for the Rewriting rule: IP NOT starting with 1.2.3.4 (example)
RewriteCond %{REMOTE_ADDR} !^1\.2\.3\.4
# Trying to access administration pages.
RewriteCond %{REQUEST_URI} ^administration
# Redirect to the 404 page.
RewriteRule .+ http://localhost/404_page.html [R=404,L]