Hey! So I finally went to the customer site that was having this issue.
I reset the router to factory settings as you asked me to. Before changing any other settings, I went straight to the OpenVPN section to configure that first and see if it works this time. I put all the settings as before with the same certificates as before and it still doesn't work. I cannot change the algorithm from SHA1 because we have many client sites and they all connect to this OpenVPN server fine, so making this change just for this one place is not an option.
Then I went and downgraded the firmware to 06.04.5 and as I said in the original post, it all started working perfectly! Same router, same settings, same certificates, same everything! Why is that?? So strange!
This means I will have to keep all our Rut9xx routers on this firmware since it seems that OpenVPN doesn't work properly on the latest firmware.. At least I found a solution I guess. Not ideal, but it works. Just hoped you would find the issue and fix it in future firmwares so I can continue getting firmware updates.
Regards,
Pav