masquerading works for Xterminal, but not Mac 0S/X

I have reduced my rules for testing purposes to:

iptables --table nat -A POSTROUTING --out-interface ppp0 -j MASQUERADE echo 1 > /proc/sys/net/ipv4/ip_forward

Now my Xterminal's telnet client (only thing I can test with) and
dns lookups go through my forwarding just fine. But when I connected my friend's Powerbook (Graphite edition?) with OS/X up to it, I saw NO traffice with iptstate.

- The Mac DID get an IP address (but not nameserver entries) from my dhcpd successfully.

- even failed lookups (bad iptables rules) from my Xterminal showed up on iptstate

Could the OS/X implementation of TCP/IP have something odd with it?
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