Can be also some conflicting pppd options, see also http://www.nabble.com/MPPE-required%...html#a10192337
If insmod worked and you see line about mppe in kernel log (type dmesg) it may be something else than missing mppe. See also http://ubuntuforums.org/showthread.php?t=16562, do you see "sent [LCP TermReq id=0x2 "MPPE required but not available"]" line too?