The following has be reported by IBM LTC:  
Use of ctc for installation of RHEL-3 U2 (64-bit) fails
Hardware Environment:
Manufacturer:         IBM 
Type:                 2066
Model:                0LF 
VM00 Control Program: z/VM    4.4.0

Software Environment:
RedHat Enterprise Linux 3 update 2, example kernel:
2.4.21-12.EL #1 SMP Fri Mar 26 20:57:10 EST 2004 s390x unknown
                                                                     

Steps to Reproduce:
1.  Boot up ramdisk system from VM reader
2.  Specify CTC connection info to let the guest talk to TCPIP stack
(stack has 
proxy-arp enabled).
3.  Attemp network connection later (ie. ping or telnet)

Actual Results:
System does not respond.  And after giving bootstrap systema access to
ping 
(which is not available on the ramdisk), found that the VM TCPIP stack
side of 
the CTC was not responding.

Expected Results:
That we would have connection established all the way.  And we would
be able to 
telnet in and proceed with the installation.

Additional Information:
We found that the mtu set automatically by redhat (1500) did not match
the 
defaults used by the VM TCPIP stack side (32760).  However setting the
mtu to 
match manually did not re-establish connection.  Also if we bring up
an already 
installed RedHat (via qdio device) system and run the commands to set
up ctc, we 
are able to use the ctc to communicate just fine.Okay, we found out
that even our installed system, really couldn't talk to the 
VM TCPIP stack.  We had another interface up on the same lan segment
and that's 
where the communication was going through.  Once that was brought
down, our 
system was similarly incommunicado.