The pppd_update_secrets_file() function in /lib/rcscripts/net.modules.d/pppd fails to repopulate a non-existent {chap,pap}-secrets file in /etc/ppp/. The file is created by "touch", but not populated with the username and password by "sed". The problem is the regular-expression voodoo in that function :)
Your voodoo mrness
Created attachment 73479 [details, diff] pppd.patch Yes, that sed cannot handle empty files. This pppd patch fixes that.
Patch is in our svn repo - will be in baselayout-1.12.0_pre12
Fixed in pre11-r2