Don't worry about the DNS for now. Typically, the ppp server on Mac OS X will forward the DNS requests for you. I have used a similar setup before and have never had to specify a dns server in either the MacTCP control panel or in the /etc/ppp/options file on Mac OS X.
Here is a post that will give you more specifics on getting the terminal connection running. Once you do that, it is easy to get ppp running using the terminal in FreePPP or MacPPP.
http://68kmla.org/forums/viewtopic.php?f=7&t=11335&start=25#p117254
Using that way you won't have to manually type in the long pppd command every time you want to log in.
--Eric
