I have Cisco 3945 with C3900-SPE150/K9, version 15.1(2)T5 exhibiting identical symptoms. PPP PAP authentication is requested, debug radius shows
RADIUS: User-Name [1] 21 "nas-port:0/0/0/64/0"
Using a Cisco 2811 instead of the 3945 works fine.
Is this the same bug?