I have the same problem, my setup currently works for PAP, but the radius server that is configured for MS-CHAP and MS-CHAP V2 denies the connection, because it using PAP. I have already configured the virtual template to use MS-CHAP and MS-CHAP V2
How do I force the connection to use MS-CHAP or MS-CHAP V2 in Cisco IOS?
Any help would be much appreciated.