TDP tag-switching - "tag not in FIB"

Question

Afternoon all,
Some guidance would be appreciated. I am supporting a small EU MPLS network - 3 P routers linked by ATM PVCs to 17 PE routers. The P routers are the route reflectors and the IGP is OSPF - most routers 7206VXR/NPE300. IOS = 12.2(7). TDP being used.
I have a customer requirement to break the traditional PE link to a P router directly by a PVC or FE if on same site.
I have attempted to link 3 PE routers in a chain, hanging off another PE router (see diagram). Basically this would result in "Top-PE" linking the chain with the rest of the EU network. Connecting "Second-PE" directly to the P router is not an option sadly. All router tag-switching interfaces and loopbacks are part of OSPF area 0 and all loopbacks can be contacted perfectly. All routers VPNV4 peer with the 3 RRs. The chain of PEs in the yellow box are all tag-switching perfectly and VPNs are working perfectly - just not beyond "Second-PE". When I run "tag-switching ip" on "Top-PE", it does not create any forwarding tags to "Second-PE" as you can see below (tag not in FIB):
top-PE# sh ip cef vrf XYZ 194.13.125.78
194.13.125.64/28, version 13780
0 packets, 0 bytes
Flow: AS 0, mask 28
tag information set
local tag: VPN-route-head
fast tag rewrite with
Recursive rewrite via tag not in FIB , tags imposed {116}
via 20.63.4.133, 0 dependencies, recursive
next hop 20.63.38.114, Ethernet6/2.2706 via 20.63.4.133/32
valid punt adjacency
tag rewrite with
Recursive rewrite via tag not in FIB , tags imposed {116}
top-PE# sh tag-switching int
Interface IP Tunnel Operational
FastEthernet1/1 Yes No Yes ! to P router
Ethernet6/2.2706 Yes No Yes ! to "Second-PE"
"sh tag forwarding-table" does not show any tags for Interface Ethernet6/2.2706
Everything works fine on "Second-PE" as follows:
Second-PE# sh ip cef vrf XYZ 194.13.125.46
194.13.125.32/28, version 318, epoch 0, cached adjacency 20.63.38.113
0 packets, 0 bytes
tag information set
local tag: VPN-route-head
fast tag rewrite with Fa0/1.2706, 20.63.38.113, tags imposed: {159 147}
via 20.63.4.131, 0 dependencies, recursive
next hop 20.63.38.113, FastEthernet0/1.2706 via 20.63.4.131/32
valid cached adjacency
tag rewrite with Fa0/1.2706, 20.63.38.113, tags imposed: {159 147}
Q1) Can PE routers simply onward tag-switch packets that are not destined for them, just as P routers do.
Q2) Can PE routers act as a P router and PE router at the same time - so have some interfaces running VRFs, and some tag-switching?
Q3) If answers to above state this "should" work, is it likely to be an IOS bug? I can find nothing on CCO about "tag not in FIB"
Q4) should the design (although not ideal in any way) shown in diagram work?
Many thanks for any assistance anybody can provide,
best regards
Neil

Answer 1

A1) yes.
A2) yes.
A3) "Recursive rewrite via tag not in FIB" means that there is no label in the fib for the loopback address of the egress PE (20.63.4.133).
Could you please provide a "show ip route 20.63.4.133", "show ip cef 20.63.4.133" and "show mpls ldp bind 20.63.4.133 32" from the "top PE".
A4) It should definitely work.
Hope this helps,