The problem is that Open Transport improperly unloads from memory, resulting in a crash when you try to reconnect after a connection is closed. It only happens if AppleTalk is off.
The problem is inherent in all version of Open Transport, including 1.1.2. It will be fixed in the forthcoming version 1.5. Meanwhile...
a. Using the AOL OpenOT extension or turning on AppleTalk are the most common work-arounds. Steve notes: "If you're already using both the Modem and Printer ports you can install the Remote Only extension which is in the Open Transport Extras folder which comes with OT. This extension allows you to turn on AppleTalk without actually selecting a physical connection port."
Update: In response to many reader queries: OpenOT is currently only available as part of the AOL 3.0 software.
b. "Another option is to turn off FreePPP's 'Allow applications to open connection' option and only connect manually. OT apparently re-loads properly when a connection is manually opened."
Update: Jim Stoneburner says that the problem can occur even with this option turned off.
c. Finally, Steve solves a long-standing mystery here at MacFixIt. Several months ago, we noted that installing the OpenOPT Modem and OpenTpt Remote Access extensions (included with OT/PPP software) remedied problems with system crashes that occurred when using FreePPP. We could never get an explanation of why this worked. Steve now says that the crashes were due to this same bug and that installing the file somehow prevents OT from unloading, much as AOL's extension does. Case closed!