When a 5500 series controller, 4404 controller, or WiSM controller module LAG port is connected to a Catalyst 3750G or a 6500 or 7600 channel group employing load balancing, note the following:
•LAG requires the Etherchannel to be configured for the "on" mode on both the controller and the Catalyst switch.
•Once the Etherchannel is configured as "on" at both ends of the link, it does not matter if the Catalyst switch is configured for either Link Aggregation Control Protocol (LACP) or Cisco proprietary Port Aggregation Protocol (PAgP) because no channel negotiation is done between the controller and the switch. Additionally, LACP and PAgP are not supported on the controller.
As for the Nortel configuration side, it has to correspond to the Cisco's side ON port-channel mode (no negotiation). I am not sure what is the default for them, you have to check Nortel's manual. Quick search gave me that doc and configuration but I am not an expert on Nortel:
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