asterisk users - Feb 2005 - G729, NAT and Transcoding (all-in-one)

Got two phones here. 1 is Cisco 7960 and other is XTen Pro. Both have 729
capabilities and plenty of licenses on Asterisk. The Cisco phone has and
registers/talks with asterisk on an internal IP (* = 10.0.3.10, phone
10.0.3.151). The SIP peer for this phone is set to NAT=No and has this Codec
Order: (g729|ulaw|alaw|gsm|g726). The XTen registers to the Asterisk
external/public IP, even when it is inside our network. This SIP peer is set
to NAT=yes and Codec Order: (g729)

Both phones can (indepently) call PSTN numbers and talk fine. When XTen
tries to call Cisco, there is a 1-way audio path. If you turn on G711 in
XTen (but leave the SIP peer settings alone) then the call is fine.

Firstly, why is asterisk even allowing this call when XTen's SIP peer has no
711 codec listing, and Second, why would a codec problem be doing this?

-Matthew