Hi, I am also getting this error with kernel 2.6.11.7 and dialup modem (USB ISDN). The problem is with persist or demand, first connection goes through fine, reconnection fails with tcsetattr error. I am using latest Debian sid tree. Downgrading ppp to version 2.4.2+20040428-6 seems to resolve the problem. All versions after that one have this problem. I did some further debugging and discovered that the first time the connection goes around the fd is 7, the next time it goes to reconnect the fd increases to 8. This might be normal, I'm not sure whats going on.
Thanks for your time, David Burrows.