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VPN technology and Term server technology do not use the same underlying protocols. VPN on the pocket pc's by Microsoft are in fact PPTP encrypted GRE traffic, or L2TP using IPSec. I forget what protocols Term service uses, but I think is it more like an SSL connection, then true encryption. But you may have to change the authentication methods on the windows server from PAP to MS-Chap v1 or 2.
I have not tried either myself, but will most likely give it a shot this weekend. I have been spending so much time on other areas of WM5 that I haven't worked on the network settings. VPN/PPTP used to be near perfect on the 2003 OS except they would not except higher levels of encryption. Just PAP I think (no MS-CHAP v1 or v2)(also PAP packets can be easily cracked so I would stay away from moving sensetive info across a PPTP tunnel!!!!!).
But mickey52, you might want to look at the server side of the connection, and see what the encryption methods are. Try using MS-Chap or just simply CHAP.
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