QUESTION: Where do I add "pppd nomagic" to stop analog modem loopback errors? (I am using Gnome PPP.)

BACKGROUND INFO:

I am using Ubuntu LTS 8.04 on a laptop and have an analog modem connected via USB serial cable.
The 8.04 dialup and the analog modem work flawlessly.

Modem disconnects when using Ubuntu LTS 10.04.1 Live USB:

I am testing LTS 10.04.1 on a live USB drive that I purchased preinstalled from On-Disk.

On the live USB drive, I am able to get a dialup connection with my ISP long enough to pull up a web page with the browser. However, the analog modem disconnects within minutes with exit codes 16 or 17.

man pppd:
16 The link was terminated by the modem hanging up.
17 The PPP negotiation failed because serial loopback was detected.

I reproduced the error message
"The PPP daemon has died. (exit code = 17)"
on the laptop running 8.04 by using the wvdial command and Gnome-PPP

The error doesn't occur when running pppconfig & pon/poff on the same platform under running Ubuntu 8.04.

wvdial command uses /etc/wvdial.conf.

It looks like pppconfig & pon/poff does not have the same problem as Gnome-PPP/wvdial.