After some investigation I determined that the script /etc/sysconfig/network-scripts/ifup-post was already attempting to take care of this for me. Yet it wasn't working. The addition of some debugging code revealed the problem: ifup-post tries to use ifconfig to determine the IP address associated with the interface that just came up, but at the time that pppd invokes ifup-post, ifconfig is not yet correctly reporting that IP address. So the code in ifup-post fails to set the hostname.

Here is my solution, in the form of an ip-up.local script. (Save this as /etc/ppp/ip-up.local and make it executable):

#!/bin/bash

# This file does the same thing as ip-up, only it handles dynamically
# assigned hostnames correctly by working around a bug wherein ifup-post
# tries to set the hostname at an earlier point, but fails, because ifconfig
# is not yet correctly reporting the IP address associated with the ppp
# interface. Instead, we take advantage of the fact that pppd passes us the
# interface's new IP address.
#
# We also handle the situation where the hostname was set during a previous
# ppp session, overwriting it with the hostname assigned in this session.
#
# If there is a "real" hostname assigned (i.e. not empty, localhost, nor
# assigned by a previous PPP session) then we leave it alone.

LOGDEVICE=$6
REALDEVICE=$1
IPADDR=$4
LASTNAME='~NOT SET~'if [ -r /var/run/ppp-hostname ]; then
    LASTNAME=`cat /var/run/ppp-hostname`
fi

/etc/sysconfig/network-scripts/ifup-post ifcfg-${LOGDEVICE}

CURNAME=`hostname`
if [ $CURNAME = '(none)' -o $CURNAME = localhost -o $CURNAME = $LASTNAME -a ${R\
EALDEVICE} != lo ]; then
        host=`host ${IPADDR} | grep Name: | awk '{ print $2 }'`

        if [ -n "$host" ]; then
                logger -p daemon.info -t ip-up.local \
                        "Setting hostname to $host based on IP $IPADDR"
                echo "$host" > /etc/HOSTNAME
                echo "$host" > /var/run/ppp-hostname
                hostname $host
        fi
fi