The log messages are pretty clear and informative: [pap] WARNING! No "known good" password found for the user. Authentication may fail because of this. [mschap] No Cleartext-Password configured. Cannot create LM-Password.
You have to either have a Cleartext password for the user or an ntlm hash if you're going to use ntlm_auth, apparently you don't have either defined for the user "jonathan"
-- John Dennis <jden...@redhat.com> Looking to carve out IT costs? www.redhat.com/carveoutcosts/ - List info/subscribe/unsubscribe? See http://www.freeradius.org/list/users.html