PPPD

В /etc/ppp/options скажи:
kdebug 7
debug
оно будет поинформативнее!

Почитай /usr/doc/ppp-x-x-x/FAQ
там эта проблема описана. Цитирую:
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Q: When I try to establish a connection, I get an error message saying
"Serial line is looped back".  Why?

A: Probably your connection script hasn't successfully dialled out to
the remote system and invoked ppp service there.  Instead, pppd is
talking to something which is just echoing back the characters it
receives.  The -v option to chat can help you find out what's going
on.  It can be useful to include "~" as the last expect string to
chat, so chat won't return until it's seen the start of the first PPP
frame from the remote system.

Another possibility is that your phone connection has dropped for some
obscure reason and the modem is echoing the characters it receives
from your system.