Yes pppd was configured to speak pap. The BB gets unhappy if you do not give it a username and password (even though it does not use them). I did get a successful full connect one time, if only for a few seconds. Even when the I could not establish a connection fully, I still got to the CONF portion of the negotiation prior to the BB ppp thread spinning down and requiring that I pull the BB's battery (hard reboot) before I could get the BB to talk ANY ppp again.
Judging from other users' (Linux and Mac) experience, this is specific to T-Mo's release of the 4.2 BB OS. I upgraded to a RIM stock OS and it works like a champ. Some mobile providers do post-rim release modification/development prior to releasing to their customers. I went to a RIM stock 4.5 release and other uses moving to a RIM stock 4.2 release have also reported not having problems.