PIX/ASA version 7.0.4 drops packets that need to be encrypted for a valid LAN-to-LAN (L2L) Virtual Private Network (VPN) peer.
This issue is due to the presence of Cisco bug ID CSCsd93380.
In PIX/ASA version 7.0.4, a valid output from the show crypto ipsec sa command is present. QuickMode completes and the active Security Parameter Index (SPI) values are present. Furthermore, the remote site is able to send traffic. The #pkts decrypt counter increases, but the #pkts encrypt counter does not increase.
This is output from the show crypto ipsec sa command: