Google for the 7705 Services Guide and in it you should find the following answer:
"This command overrides the advertised VC-type MTU of all spoke-sdp's of L2 services using this SDP-ID. When enabled, the router signals a VC MTU equal to the service MTU, which includes the Layer 2 header. It also allows this router to accept an MTU advertized by the far-end PE which value matches either its advertised MTU or its advertised MTU minus the L2 headers.
By default, the router advertizes a VC-MTU equal to the L2 service MTU minus the Layer 2 header and always matches its advertized MTU to that signaled by the far-end PE router, otherwise the spoke-sdp goes operationally down."