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Much literature is dedicated to how a project manager should create an atmosphere for SMEs/team members to do their best work by clearing non-SME (subject matter expert)/non-project related work off their plate.
Other literature discusses the role of structuring the team or organization so SMEs/direct reports can take work off the team leader's plate so the team leader can focus on the highest value added work they can produce.
How can these two roles be balanced?
In the abstract, any leadership or middle-management role has a defined scope within the organization. It's worth a moment to analyze the organizational role itself.
If your role says "you are responsible for the delivery of X" then you want people to whom you can delegate your responsibilities (e.g. take stuff off your plate). Ultimately, though, the responsibility is yours, because it's been defined that way.
If your role says "you are responsible for enabling the efficient operation of the development team and overseeing the project methodology," then you are being tasked with a coaching or servant-leader role where you are responsible for process and removing impediments to the process. In this case, the responsibility for process is yours, while the responsibility for delivery rests with the remainder of the team because it's defined that way.
Can a servant-leader delegate responsibilities? No, because most of the responsibility isn't his to delegate in the first place. Can a "buck stops here" authority successfully coach team members on process or clear impediments? Possibly.
On some level, people are people. Personality and style always play a part. You can be an opinionated coach, or a laissez-faire manager, but the real question is one of efficacy.
Different roles generally require different styles of leadership, but any conflict between the two is generally a result of improper or informal definition of the leader's scope of responsibility.
Since questions on this site should be practical, rather than abstract, we'll assume this is a situation you're actually facing. If so, here's a concrete suggestion: get clarification on your role, and the scope of your responsibility.
If you're being asked to wear too many hats, or hats that require antithetical leadership styles, then it's fair to ask for these things to be clarified. In some cases, it may turn out that redefining the role is enough; in others, you may need to split responsibilities among more than one person.
This is, incidentally, why the Scrum methodology requires that the Scrum Master not be a member of the development team or the Product Owner. The Scrum Master is a process referee, and being responsible for feature delivery or stakeholder management would be a conflict of interest and a distraction from the role's core task of ensuring that the methodology is successfully followed.
I don't think there's a problem with these two roles coexisting at all. The PM's primary job is to set the priorities of the project, and to allocate and assign resources. This applies to him/her as well.
The PM needs to look at the responsibilities of the project, and everyone else's responsibilities and ask "what the things that only I can do, that I as PM and Team Member must do myself". From there delegation can happen and the project can go forward.
So the PM can decide what are the tasks/responsibilities that they can't delegate, and then look at delegating the rest. But they can also use this reflection to manage the duration. If the PM is the lead arch for example, and his/her work will take X time, then he/she needs to also account for how much time the PM side will take and factor in how that will affect their other work.
Ultimately it comes done to not being an "either/or" question (team leder or SME), but rather a "what's best for the project" question.
I think these are two sides of the same coin. The key is finding an appropriate level of delegation of authority and cultivating the courage to stick to it.
Ideally good delegation of authority will extend throughout the project hierarchy from the project sponsor/director through the project manager to the team leaders and team members, and will allow each to focus on work and issues that are appropriate for their level. That way people do the work they should be doing and not what someone else should be doing. What is considered to be an "appropriate" level of delegation depends on the criticality and complexity of the project, experience and expertise of the people in the different roles, organizational culture, etc.
This can be more or less difficult to implement appropriately depending on individual personalities, e.g. a PM who has a strong coding background and is a PM only because that is the next step on his/her career path could have a tendency to get their fingers more into the team member's work than they should. You have to have a certain level of self-discipline to stick to your own responsibilities when you "know" you can do something faster/better/the-way-you-want if you do it yourself rather than let the new guy do it.
The difference is between "Teams" and "Individuals"
As a leader/manager of a team, you want to do everything you can to empower the team to get the job done. You take over the non-SME work, you facilitate communication, you clear roadblocks and you also make sure the critical processes are followed. This is you serving the team.
As a leader/manager of an individual, you're job is to help that person excel and grow. One of the ways to do this is to delegate some of your work load to that person. Other ways are coaching and giving focused feedback on performance. Mark Horstman, of Manager Tools, says one of the best signs of a good manager is "they get their people promoted."
These two activities can exist in a single instance though it is not that common for a Project Manager to be in the second role as they typically don't have direct reports, or if they do, it is a team of PM who work on multiple projects.
