I am not sure what to say about the errors, but here's my options
file:
/dev/tty01
# demand dialling doesn't work, because pppd insists on a static
# remote address.
#0.0.0.0:0.0.0.0
#ipcp-accept-remote
#demand
modem
crtscts
asyncmap 20A0000
escape FF
kdebug 0
debug
defaultroute
lock
netmask 255.255.255.0
connect 'chat -v REPORT "" "" "atz0" "OK" "atw1dt,,w3491201"  "ogin:" "*"  "assword:"  "*"'
mru 2088

I notice you have a very low mtu. I wouldn't suspect this would speed
things up. I have mine set to 2088, and more importantly have my
tcp_recv_buffer in the kernel set to twice that, and I am getting 2.1
- 3.1K cps in transfers.

Also, by having 38400 as the line speed, you are defeating any modem
level compression that might take place. 

(Now that I think about it, I have no idea what the default speed
is. I'll have to look at that...)

Given that you have a 28,800 modem and 16550's, you should be able to
set it for 115200. This can help as well.

Also, set up your syslog to capture the log messages and take a
look. you can get a play by play on the negotiation of the protocol,
which is invaluable.
--
Hacksaw