Windows 7 "incoming connection" VPN does not seem to work configured with "used dhcp." You need to set an IP range manually (one different from your current LAN segment). e.g. my lan is a 192.168 network so I specified 10.1.1.100 - 10.1.1.200 for the DHCP. On the iPhone before doing this it would just say "connecting -> authenticating -> disconnecting" and then fail.
found the information here: (can't find thread again)
All the random crap I spend all day long figuring out.
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