I've updated my guide on howto setup a VPN with L2TP and IPSEC to the latest ubuntu version:
This is a guide on setting up a IPSEC/L2TP vpn on Ubuntu 12.10 using Openswan as the IPsec server, xl2tpd as the l2tp provider and ppp for authentication. We choose the IPSEC/L2TP protocol stack because of recent vulnerabilities found in pptpd VPN’s.
IPSec encrypts your IP packets to provide encryption and authentication, so no one can decrypt or forge data between your clients and your server. L2TP provides a tunnel to send data. It does not provide encryption and authentication though, that is why we need to use it together with IPSec.
Read more:
https://raymii.org/s/tutorials/IPSEC_L2TP_vpn_with_Ubuntu_12.10.html
Thanks to @AnthonySmith for the VPS this time, can now confirm that it works both on KVM (via @George_Fusioned ) and on Xen (I think IH uses PV, not HVM).