Add a resource "link to a file or web site" and link a pdf.
Visit the page with the resource.
Look at the xhtml code.
Frameset are not allowed by xhtml strict.

It exists the way to embed pdf and Moodle 1.8 should use it.
See: http://joliclic.free.fr/html/object-tag/en/index.php
or
http://joliclic.free.fr/html/object-tag/en/object-application.html#pdf
or, for details of the tested browsers and theirs plugins,
http://joliclic.free.fr/html/object-tag/en/object-results.php#browsersDetails