hello janjan,
I am just wondering what is the output of "show interface e0" when you have configured the two routers for PPP encapsulation.
I also suggest that you should stick with PPP encapsulation, since PPP implementation is standardized and HDLC is not.
You might also want to try enabling debugging on the cisco router, to see the error messages that it is generating. But remember to turn it off as soon as you are finished with it, since it will significanly slow down your router operation.
Jeffrey
