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Unless your LAC3 continues with the animation, what you describe is normal. Mine too performs the "help me get an IP" dance in the tray upon cradling, but it stops after 5 seconds. At the moment the dance is over AS is fully connected, having given itself the usual autoconfiguration address.
If your virtual network adapter never stops trying to get an IP, you may have fudged up your network settings on your desktop trying to get rid of the PPC networking error. Uninstalling and reinstalling ActiveSync should fix the problem.
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