I posted an idea and you decided not to reply to my questions !
I suspect that your VPN server doesn't know Microsoft Radius attributes and refuses to send them to the radius server. I've tested a bad setup (lack of Microsoft radius dictionary), and I get the same radiusd -X debug log: no MS-CHAP Challenge in the request...
I've ensured thet /etc/radiusclient/ and /etc/raddb have the same dictionary. (dictionary and dictionary.microsoft,.)
I asked "have you checked possible error messages in /var/log/messages " on the vpn server ? To be more specific, look for the following lines in you log file: " rc_avpair_new: unknown attribute"
No such error messages appear on my Radius Server. I had them once when I tried to change the dictionary to the one in /usr/share/freeradius, but I imported the official dictionary.microsoft one and they went away.
If you see such lines it might be that your radiusclient library (used by the PPPd plugin on your VPN server) doesn't understand the Microsoft attributes (for instance the MS-CHAP Challenge). Thus, the PPPd radius plugin doesn't send these attributes that are required for Freeradius to do MS-CHAP authentication.
Could you really check that your dictionnary file on the VPN server side contains a line like: INCLUDE /usr/share/radiusclient-ng/dictionary.microsoft
and check the content of this file...
HTH, Thibault
I found A possible culprit. Jan 13 16:54:41 kurama pppd[11364]: rc_avpair_new: unknown attribute 11 Jan 13 16:54:41 kurama pppd[11364]: rc_avpair_new: unknown attribute 25