the problem occuring with MPLS over ethernet might be MTU size related. The original ethernet specification did not allow a MTU larger than 1500 Bytes. If labels are used, this would restrict your customer MTU to f.e. 1492 Byte, when no adjustments are done.
For most ethernet interfaces on routers today larger MTU sizes are no problem, especially with GE the MTU can be up to 9216 Bytes.
Additional care has to be taken, when LAN switches are involved. They might not allow you to increase the accepted frame size above 1518 Bytes, thus creating MTU issues. The restrictions can be hardware based and replacement could be the only option.
But with proper hardware and configuration in place this should create no problem.
MPLS is independent of physical interface or interface encapsulation. In a frame-mode MPLS implementation, regardless of the WAN link you use (Ethernet, FR, ATM PVC, PPP), MPLS will insert the label stack between the Layer-2 and Layer-3 header of the packet/frame.
In cell-mode implementation across ATM SVCs, MPLS treats the ATM VPI/VCI values as labels, hence the ATM switching matrix is the MPLS label database (LFIB - Label Forwarding Information Base).
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