Usually a COntivity client is looking for a Contivity box on the other end. I can't say it won't work, however, I;ve not seen any successful implementations of Nortel contivity client terminating to a Linksys box.
Regarding the error you're getting, typically this is received when there is something blocking the IPSec connection at a Windows level. You must be sure you don;t have the Cisco IPSec client or another VPN IPSec client installed. If you, you need to remove both, and then reinstall the Nortel CVC.
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