I've experienced this issue in my lab where in the VPLS won't come up and lowering down the IP MTU (for the OSPF interface) fixed it.

My understanding is that the IP MTU and L2 MTU should be larger than the MPLS MTU so you can send full frame MPLS traffic w/out fragmentation.

For context, my lab network is LDP based VPLS. The OSPF path / interfaces has L2 MTU of 2000 and IP MTU of 1500. I have a VPLS router at the very far end where I increased the IP MTU to 1700 on both ends of OSPF segment and kept the MPLS MTU 1508 and VPLS advertised L2 MTU of 1536.. OSPF comes up, can ping 1700 w/out fragmentation but the VPLS on that router won't come up. I also observed that:
- Targeted LDP session is up to the other end VPLS
- On VPLS interface, remote label is empty. imposed labels both transport and VPN label is present.
- Traceroute is ok too

I've rolled back my change to 1500 IP MTU and VPLS came up straight away.

What did I missed? Why is increasing the IP MTU / IGP underlay causing the VPLS to go down?