I have unconfirmed tips that changing the encryption on the VPN server (at least this supposedly works for L2TP connections) to AES-128 resolves the issue. FWIW, I'm using 3DES. Here is my logs from the iPhone Configuration Utility:
FYI, here's what's happening on the iPhone side:
Tue Jun 22 12:11:03 iPhone configd[25] : SCNC: start, triggered by Preferences, type L2TP, status 0
Tue Jun 22 12:11:03 iPhone configd[25] : .934 (+35.687) SCDynamicStore "network" notification
Tue Jun 22 12:11:03 iPhone configd[25] : .996 (+0.061) SCDynamicStore "network" notification
Tue Jun 22 12:11:04 iPhone pppd[1692] : pppd 2.4.2 (Apple version 486) started by mobile, uid 501
Tue Jun 22 12:11:04 iPhone configd[25] : .196 (+0.199) SCDynamicStore "network" notification
Tue Jun 22 12:11:04 iPhone configd[25] : .252 (+0.056) SCDynamicStore "network" notification
Tue Jun 22 12:11:04 iPhone configd[25] : .312 (+0.059) SCDynamicStore "network" notification
Tue Jun 22 12:11:04 iPhone pppd[1692] : L2TP connecting to server 'x.x.x.x' (x.x.x.x)...
Tue Jun 22 12:11:04 iPhone pppd[1692] : IPSec connection started
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO:
*** racoon started: pid=1693 started by: 1
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: @(#) racoon / IPsec-tools
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: @(#)This product linked OpenSSL 0.9.7l 28 Sep 2006 (
http://www.openssl.org/)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: Reading configuration from "/etc/racoon/racoon.conf"
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] WARNING: /var/run/racoon/x.x.x.x.conf:9: "support_mip6" it is obsoleted. use "support_proxy".
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: racoon launched by launchd.
Tue Jun 22 12:11:04 iPhone sandboxd[1694] : racoon(1693) deny network-outbound /private/var/tmp/launchd/sock
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: 10.16.4.171[500] used as isakmp port (fd=7)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: 10.16.4.171[4500] used as isakmp port (fd=8)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: 127.0.0.1[500] used as isakmp port (fd=9)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: 127.0.0.1[4500] used as isakmp port (fd=10)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: fe80::1%lo0[500] used as isakmp port (fd=11)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: fe80::1%lo0[4500] used as isakmp port (fd=12)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: ::1[500] used as isakmp port (fd=13)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: ::1[4500] used as isakmp port (fd=14)
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: found launchd socket.
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] NOTIFY: accepted connection on vpn control socket.
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: IPsec-SA request for x.x.x.x queued due to no phase1 found.
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: initiate new phase 1 negotiation: 10.16.4.171[500]<=>x.x.x.x[500]
Tue Jun 22 12:11:04 iPhone racoon[1693] : [1693] INFO: begin Identity Protection mode.
Tue Jun 22 12:11:04 iPhone racoon[1693] : IPSec Phase1 started (Initiated by me).
Tue Jun 22 12:11:05 iPhone kernel[0] : launchd[1693] Builtin profile: racoon (sandbox)
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: received Vendor ID: RFC 3947
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: Selected NAT-T version: RFC 3947
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: Hashing x.x.x.x[500] with algo #2
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: Hashing 10.16.4.171[500] with algo #2
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: Adding remote and local NAT-D payloads.
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: NAT-D payload #0 doesn't match
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: NAT-D payload #1 verified
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: received Vendor ID: draft-ietf-ipsra-isakmp-xauth-06.txt
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: received Vendor ID: DPD
Tue Jun 22 12:11:05 iPhone racoon[1693] : [1693] INFO: NAT detected: ME
Tue Jun 22 12:11:06 iPhone racoon[1693] : [1693] INFO: ISAKMP-SA established 10.16.4.171[4500]-x.x.x.x[4500] spi:799785f0ca7b5cb0:9a6b454c3a130ab0
Tue Jun 22 12:11:06 iPhone racoon[1693] : IPSec Phase1 established (Initiated by me).
Tue Jun 22 12:11:06 iPhone racoon[1693] : [1693] INFO: initiate new phase 2 negotiation: 10.16.4.171[4500]<=>x.x.x.x[4500]
Tue Jun 22 12:11:06 iPhone racoon[1693] : IPSec Phase2 started (Initiated by me).
Tue Jun 22 12:11:06 iPhone racoon[1693] : [1693] INFO: NAT detected -> UDP encapsulation (ENC_MODE 2->4).
Tue Jun 22 12:11:06 iPhone racoon[1693] : [1693] ERROR: fatal NO-PROPOSAL-CHOSEN notify messsage, phase1 should be deleted.
Tue Jun 22 12:11:06 iPhone racoon[1693] : [1693] ERROR: Message: 'l No proposal is chosen'.
Tue Jun 22 12:11:19 iPhone racoon[1693] : [1693] ERROR: fatal NO-PROPOSAL-CHOSEN notify messsage, phase1 should be deleted.
Tue Jun 22 12:11:19 iPhone racoon[1693] : [1693] ERROR: Message: 'l No proposal is chosen'.
Tue Jun 22 12:11:36 iPhone pppd[1692] : IPSec connection failed
Tue Jun 22 12:11:36 iPhone racoon[1693] : [1693] ERROR: x.x.x.x give up to get IPsec-SA due to time up to wait.
Tue Jun 22 12:11:36 iPhone configd[25] : .218 (+31.906) SCDynamicStore "network" notification
Tue Jun 22 12:11:36 iPhone configd[25] : .252 (+0.033) SCDynamicStore "network" notification
Tue Jun 22 12:11:36 iPhone configd[25] : .266 (+0.013) SCDynamicStore "network" notification
Tue Jun 22 12:11:36 iPhone configd[25] : .333 (+0.066) SCDynamicStore "network" notification
Tue Jun 22 12:11:36 iPhone racoon[1693] : [1693] WARNING: glob found no matches for path "/var/run/racoon/*.conf"
Tue Jun 22 12:11:36 iPhone racoon[1693] : [1693] INFO: 10.16.4.171[500] used as isakmp port (fd=7)
Tue Jun 22 12:11:36 iPhone racoon[1693] : [1693] INFO: 127.0.0.1[500] used as isakmp port (fd=8)
Tue Jun 22 12:11:36 iPhone racoon[1693] : [1693] INFO: fe80::1%lo0[500] used as isakmp port (fd=9)
Tue Jun 22 12:11:36 iPhone racoon[1693] : [1693] INFO: ::1[500] used as isakmp port (fd=10)
Tue Jun 22 12:11:36 iPhone configd[25] : .371 (+0.038) SCDynamicStore "network" notification
Tue Jun 22 12:11:36 iPhone configd[25] : .400 (+0.028) SCDynamicStore "network" notification
Tue Jun 22 12:11:36 iPhone pppd[1692] : Exit.