L3VPN and peering using connected interface
R1 (PE)x----R3 (P)----xR2(PE)
I won't go into detail on this but thought it was worth sharing. Typically when we peer L3VPN we use loopbacks because if we use the interface facing the P routers we end up with the Label Switch Path being broken because the VPN label is exposed too soon becuase of PHP. This can be tweaked using route-maps to reset the next-hop to some other interface on the remote PE. I found you can also get round this using:
1) OSPF point to Multipoint (Serial or Ethernet)
2) PPP (Serial or Ethernet with PPPoE)
In both cases the the /32 that is advertised allows the LSP to stay intact because it is preferred to the connected interface due to longest match rules. With the PPP neighbor route we need to 'redistribute connected' to maintain the /32 LSP.