I'm seeing the same issue. I don't think making changes on the syslog server side will help because the syslogd quits. If you take a look at /var/log/.vmsyslogd.err you will probably find something similar to:
2011-12-16T15:09:48.103Z vmsyslog.loggers.network : ERROR ] servername:514 - socket error : [Errno 111] Connection refused
2011-12-16T15:09:48.103Z vmsyslog.main : ERROR ] <servername:514> failed to write log, disabling
Seems like a bug to me.