Here's a working config for PPPoE on an 851.
interface FastEthernet0/1
description DSL WAN Interface
no ip address
no ip redirects
no ip unreachables
no ip proxy-arp
no ip mroute-cache
duplex auto
speed auto
pppoe enable
pppoe-client dial-pool-number 1
!
interface Dialer1
description DSL WAN Dialer$FW_OUTSIDE$
ip address negotiated
no ip unreachables
ip nat outside
ip virtual-reassembly
encapsulation ppp
no ip mroute-cache
dialer pool 1
dialer-group 1
no cdp enable
ppp authentication pap callin
ppp pap sent-username dude@static.sbcglobal.net password 0 SeCrEt
dialer-list 1 protocol ip permit
HTH and please rate