This may be the same problem I encountered with kubuntu 6.06.
I was getting the message "pppd died The remote system is required to 
authenticate itself" when kppp was run from a terminal. 
I read the kppp help and I found a section where they suggests to edit the 
/etc/ppp/options file or to simply remove it. 
I removed it and kppp successfully worked.

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kppp will not connect using phone as modem
https://launchpad.net/bugs/13694

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