When you have the whole block assembled then you can remove the paper. Tear it gently because you don't want to rip out your seams!
Oh, did I mention above that you need to use a very small stitch to help perferate the paper so it tears easier? I usually set my machine to 1.5.
If I have several blocks that have seams to match I may leave the paper in until I've put the block together.
On Tim's star block I left the paper attached until the whole block was assembled. Then take a pair of tweezers with you, get a good movie on the tele and watch the show and rip! Oh, and keep a trash can near by!
If I can answer any more questions please ask. I hope this helps.