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7.10. ( Dial on Demand ) - Can I use Diald or the Dial-on-Demand feature of PPPd with IP MASQ?

Definitely! IP Masquerading is totally transparent to Diald or PPP. The only thing that might become an issue is if you use STRONG firewall rulesets with dynamic IP addresses. See the FAQ item, "Does IP Masquerade work with dynamically assigned IP addresses?" above for more details.