Hi Jim,
On page 433 in the IPsec chapter of the 2.1 draft document, it says "if [the network option] is unchecked, the clients will attempt to send all of their traffic, including Internet traffic, across the tunnel".
Assuming I am ok handling the Internet traffic, wouldn't this bypass any conflicting ip address issues as described in this thread?
–jason
The NAT must be done on the client side before it leaves. The other router can never see the address.
In the case of the LANs overlapping, both sides must do the NAT so they appear to be on different subnets. You can't do all of the NAT on one side in both directions.
Save yourself a ton of time and headaches, just bite the bullet and renumber the side you have more control of now.