Ok, having experimented a little more I can add these facts.
1. LAN systems DO see the proxy arp for the VPN host
2. A traceroute from the LAN gets as far as the SME box.
3. The VPN host does see a route through the VPN to the SME box.
4. A traceroute from the host gets as far as the SME box
So... my new question is "WHat do I need to do to actually
have the SME box forward the packets?  Is it a matter of the
Chains?  Is it a kernel parameter?  What am I missing?"
TIA 

EEhud Gavron wrote:
> 
> We have a PIX firewall connecting our internal network to the
> Internet.
> 
> We have an SME server which is set to "Server Only" mode
> and sits on the DMZ of the PIX.  
> 
> We have connected the second interface of the SME server
> to the Internal network, and wish to use it as a PPTP gateway
> for external users to access the internal network.  
> 
> (Side note:
> our version of the PIX does not support VPNs or we would have
> used it for this.  Side note 2: we do not want the E-smith box
> doing full time routing between the two... so the PIX stays.)
> 
> So the BIG question I have is 
> "How do I enable PPTP and the second interface without
> turning it into a Gateway box"  or "Is there a harm in turning
> it into a gateway box?"
> 
> Here's what I did do:
> 1. ifconfig eth1 ip.address.on.inside
>     it pings local net fine
> 2. I can form a VPN to it from my home PC, and I can
>     ping the e-smith server fine.  Traceroute shows it
>     one hop away (ergo routing through the tunnel 

> 
> 3. I CANNOT ping, trace etc. THROUGH the box
>     to the local net.
> 
> My guess is the box is NOT doing proxy-arp for the
> remote system at the end of the tunnel.
> 
> So I guess I would like to know if there is a way to
> "enable pptp service" the right way so it works...
> or what assumptions I'm making that are wrong or
> unnecessary.
> 
> Any help appreciated.  I am an IP internals jockey,
> but not much of an e-smith jockey.
> 
> Ehud
> gavron@wetwork.net