I guess I will also have to configure pix to allow ipsec traffic between the 2 servers.<BR><BR>Kindly let me know if I am in the right direction here.

“Configuring Router to VPN Client, Mode-config, Wild-card Pre-shared Key with NAT” “Sample Configuration: IPSec Tunnel through Firewall with NAT” ...

Worth noting, FreeBSD didn't support a tunnel interface for IPsec until fairly recently, and I believe Netgate / pfSense people may have had at least some hand in getting it added.