Setup your router interface cards such that the interface w/"physical-layer async" comes before the interface it will be used to back up. It will then get initialized before the "backup interface" command.

Implementing dial-on-demand routing (DDR) backup on a router that uses

Network Address Translation (NAT) involves more configuration than is

neccessary for regular DDR backup. This is because the router must translate packets to and from the "inside" network using different "outside" addresses depending on whether the primary or backup link is active." ... "Make sure that your Internet Service Provider (ISP) can provide you with two different IP addresses or subnets. Use one IP address or subnet for the DSL connection and the other for the backup ISDN connection. IP addresses on the two dialer interfaces need to be explicitly assigned and cannot be negotiated during PPP negotiation. This means that the ip address negotiated command is not permitted under the dialer interfaces.

For troubleshooting the 1706 router click this link.

http://www.cisco.com/en/US/products/hw/routers/ps221/prod_tech_notes_list.html