This directory may contain a number of files. You probably already have a file called options. This file holds all of the global options for pppd. These options cannot be overridden by pppd on the command line.

Your options file should contain at least the following:

ipcp-accept-local
ipcp-accept-remote
proxyarp
noauth

The first two lines tell pppd to accept what the other end specifies for IP addresses. This is necessary when hooking up remote offices, but can be disabled if you are only connecting home users. It's okay to leave it on, as it does not prevent the server from assigning addresses, it only says it that it's okay to accept what the client asks for.

The third line is very important. From the pppd man page:

proxyarp
       Add an entry to this system's ARP [Address  Resolu-
       tion  Protocol]  table  with  the IP address of the
       peer and the Ethernet address of this system.  This
       will  have  the effect of making the peer appear to
       other systems to be on the local ethernet.		

This is important because if it is not done, local traffic will not be able to get back through the tunnel.

The last line is just as important. This tells pppd to allow connections without username and password. This is safe since authentication is already handled by sshd.

If you are handling other services with pppd, you should consider that the configurations for these other services may not be the same as what the VPN system needs. pppd is designed such that the options in the main options file /etc/ppp/options cannot be overridden by options specified at runtime. This is done for security reasons. In order to avoid conflict, determine which options cause the conflict, and move them from the main file into a separate options file that is loaded when the appropriate application of pppd is run.