Since posting my original note, I discovered that a bug has been verified that may apply to my situtation. The Bug id is CSCdz88896 and it talks about a Win2k/XP client that can bring up the tunnel but not pass traffic when the client's host IP closely resembles the IP of the device it is trying to create a VPN with.
I then proceeded to change my local subnet definition on my dsl router from a 192.168.x.x address to a 10.x.x.x address and then retried the VPN connection. This time, I connected successfully and the previous log errors were not reported. HOWEVER, for some reason I still cannot pass traffic through the tunnel.
I am having a very simular problem. After the tunnel connects, I can ping a terminal server that I want to access but cannot get remote desktop to connect. I can smd back to the routers dmz address. I am also using xp sp2. My ts is in a dmz and if I connect the laptop to the dmz it will connect to the ts. Could sp2 be blocking something the vpn client needs?
you mentioned you can ping the terminal server, have you try to telnet to the server with port 3389?
i had an issue before but can never resolved it. i can telnet to the server with port 3389 but the terminal session client just wouldn't work. it only affects couple pc, not all. eventually those pc have been re-build and since then it works fine.
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