Well, mppe support is in the kernel code, however it is not compiled into the standard Internet Tablet kernels. So yes, you definitely have to install fanoush' kernel (or compile your own, of course). Flashing the kernel is easy. And if you mess it up (don't know how you would apart from pulling the wire or running out of power, though), you can just flash the original kernel from the original firmware download. There are command line options to the flasher for that. This way your root filesystem is not touched.

While you are at flashing, I highly recommend fanoush' boot menu and booting from SD cards. Backing up is much easier and having a rescue system on the internal flash is worth a lot.