I have the exact same problem. Hopefully Apple will fix this soon. I'm trying to connect to a Linux Box with OpenSwan and L2tpd.
My Logs:
Leopard:
Dec 2 14:43:44 MRiedel-PB-G4 pppd[18603]: L2TP connecting to server XXXXXXXX...
Dec 2 14:43:47 MRiedel-PB-G4 pppd[18603]: IPSec connection started
Dec 2 14:43:48 MRiedel-PB-G4 pppd[18603]: IPSec connection established
Dec 2 14:43:51 MRiedel-PB-G4 pppd[18603]: L2TP connection established.
Dec 2 14:43:51 MRiedel-PB-G4 pppd[18603]: Connect: ppp0 <--> socket[34:18]
Dec 2 14:43:51 MRiedel-PB-G4 pppd[18603]: MPPE required but peer negotiation failed
Dec 2 14:43:52 MRiedel-PB-G4 pppd[18603]: Connection terminated.
Dec 2 14:43:52 MRiedel-PB-G4 pppd[18603]: L2TP disconnecting...
Dec 2 14:43:52 MRiedel-PB-G4 pppd[18603]: L2TP disconnected
And on the Linux Box:
Dec 2 23:43:47 bt-server pluto[2941]: "L2TP-PSK"[9] 63.231.xxx.xxx #16: STATE
QUICKR2: IPsec SA established {ESP=>0x09c22235 <0x8522bdef xfrm=AES
128-HMACSHA1 NATD=63.231.52.188:4500 DPD=none}
Dec 2 23:43:49 bt-server l2tpd[6376]: control_finish: Peer requested tunnel 8 twice, ignoring second one.
Dec 2 23:43:49 bt-server l2tpd[6376]: Connection established to 63.231.xxx.xxx, 56177. Local: 51805, Remote: 8. LNS session is 'default'
Dec 2 23:43:49 bt-server l2tpd[6376]: Call established with 63.231.xxx.xxx, Local: 56732, Remote: 18603, Serial: 1
Dec 2 23:43:49 bt-server pppd[7541]: pppd 2.4.3 started by root, uid 0
Dec 2 23:43:49 bt-server pppd[7541]: using channel 2105
Dec 2 23:43:49 bt-server pppd[7541]: Using interface ppp2
Dec 2 23:43:49 bt-server pppd[7541]: Connect: ppp2 <--> /dev/pts/4
Dec 2 23:43:49 bt-server pppd[7541]: sent [LCP ConfReq id=0x1 <asyncmap 0x0> <auth chap MS-v2> <magic 0x6d3895f7> <pcomp> <accomp>]
Dec 2 23:43:49 bt-server pppd[7541]: rcvd [LCP ConfReq id=0x1 <asyncmap 0x0> <magic 0x4d928d7a> <pcomp> <accomp>]
Dec 2 23:43:49 bt-server pppd[7541]: sent [LCP ConfAck id=0x1 <asyncmap 0x0> <magic 0x4d928d7a> <pcomp> <accomp>]
Dec 2 23:43:49 bt-server pppd[7541]: rcvd [LCP ConfAck id=0x1 <asyncmap 0x0> <auth chap MS-v2> <magic 0x6d3895f7> <pcomp> <accomp>]
Dec 2 23:43:49 bt-server pppd[7541]: sent [LCP EchoReq id=0x0 magic=0x6d3895f7]
Dec 2 23:43:49 bt-server pppd[7541]: sent [CHAP Challenge id=0x12 <4885f2c708e0dbd85a3cf7cf60ed6b24>, name = "IPsecVPN"]
Dec 2 23:43:50 bt-server pppd[7541]: rcvd [LCP EchoReq id=0x0 magic=0x4d928d7a]
Dec 2 23:43:50 bt-server pppd[7541]: sent [LCP EchoRep id=0x0 magic=0x6d3895f7]
Dec 2 23:43:50 bt-server pppd[7541]: rcvd [LCP EchoRep id=0x0 magic=0x4d928d7a]
Dec 2 23:43:50 bt-server pppd[7541]: rcvd [CHAP Response id=0x12 <c574d7703411572a98de35e99f3d81ad00000000000000000b4906c55495f2727310659600c5c1 405145b06079ad9fbe00>, name = "xxx"]
Dec 2 23:43:50 bt-server pppd[7541]: sent [CHAP Success id=0x12 "S=2C78FC23BCE0D753988BB8A6AA9EB3EB22326318 M=Access granted"]
Dec 2 23:43:50 bt-server pppd[7541]: sent [CCP ConfReq id=0x1 <deflate 15> <deflate(old#) 15> <bsd v1 15>]
Dec 2 23:43:50 bt-server pppd[7541]: sent [IPCP ConfReq id=0x1 <compress VJ 0f 01> <addr 192.168.184.2>]
Dec 2 23:43:50 bt-server pppd[7541]: rcvd [CCP ConfReq id=0x1 <mppe +H -M +S +L -D -C>]
Dec 2 23:43:50 bt-server pppd[7541]: sent [CCP ConfRej id=0x1 <mppe +H -M +S +L -D -C>]
Dec 2 23:43:50 bt-server pppd[7541]: rcvd [LCP TermReq id=0x2 "MPPE required but peer negotiation failed"]
Dec 2 23:43:50 bt-server pppd[7541]: LCP terminated by peer (MPPE required but peer negotiation failed)
Dec 2 23:43:50 bt-server pppd[7541]: sent [LCP TermAck id=0x2]
Dec 2 23:43:50 bt-server pppd[7541]: rcvd [CCP ConfRej id=0x1 <deflate 15> <deflate(old#) 15> <bsd v1 15>]
Dec 2 23:43:50 bt-server pppd[7541]: Discarded non-LCP packet when LCP not open
Dec 2 23:43:50 bt-server l2tpd[6376]: control_finish: Connection closed to 63.231.xxx.xxx, serial 1 ()
Dec 2 23:43:50 bt-server pppd[7541]: Terminating on signal 15
Dec 2 23:43:50 bt-server pppd[7541]: Modem hangup
Dec 2 23:43:50 bt-server pppd[7541]: Connection terminated.
Dec 2 23:43:50 bt-server pppd[7541]: Connect time 0.1 minutes.
Dec 2 23:43:50 bt-server pppd[7541]: Sent 41 bytes, received 10 bytes.
Dec 2 23:43:50 bt-server pppd[7541]: Exit.
Even if I force MPPE on the linux side, I get the same error. Please fix!
Regards