> May 16 15:40:28 redhat pppd[2102]: Problem: all had
> bit 7 set to 0

I saw this same error on RH 6.2 while trying to connect to Infocom.  In my
case it had something to do with their server using CHAP only authentication
and not CHAP and PAP. I could be wrong but I was able to solve it after
configuring chap-secrets file and not just pap-secrets.

Holden


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