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vpn site to site issues

Hi all, I am currently creating a vpn tunnel with an external company, I am doing this from my cisco asa 5520, connectting to a smoothwall firewall.

however the tunnel for some reason will not form. will it work if I encrypt there destination of 192.168.2.0 and 192.168.7.0 but they have encrypted the source from there side as 192.168.0.0/16.

looking at the logs, phase 1 completed successfully, but phase 2 is not completing, it is saying ACL does not match proxy id source x.x.x.x, then it says all ip sec SA proposals found unacceptable, then it says removing peer from correlator table.

I have created the acls by using the group policy, and applying to the tunnel group, is this ok?

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