System configuration and debug output.
Demo OS Linux demopbx.local 2.6.18-53.1.14.el5
Prod OS Linux prodpbx.local 2.6.18-92.1.18.el5

Demo IAX Config
type=peer
qualify=yes
host=10.0.0.8
deny=all
allow=alaw&ulaw
context=from-internal
trunk=yes

Prod IAX config
type=peer
qualify=yes
host=10.0.0.2
deny=all
allow=alaw&ulaw
context=from-internal
trunk=yes

Turned on IAX debug and when dialing out from the demo system
the error is:

[Dec  9 16:04:13] VERBOSE[6455] logger.c:    VERSION         : 2
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CALLED NUMBER   : xxxxxxxxxx
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CODEC_PREFS     : (ulaw|gsm|alaw)
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CALLING NUMBER  : 7000
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CALLING PRESNTN : 0
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CALLING TYPEOFN : 0
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CALLING TRANSIT : 0
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CALLING NAME    : Operator
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    LANGUAGE        : en
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    FORMAT          : 4
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    CAPABILITY      : 57358
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    ADSICPE         : 2
[Dec  9 16:04:13] VERBOSE[6455] logger.c:    DATE TIME       : 2008-12-09  16:04:12
[Dec  9 16:04:13] VERBOSE[6455] logger.c:
[Dec  9 16:04:13] VERBOSE[6448] logger.c: Rx-Frame Retry[ No] -- OSeqno: 000 ISeqno: 001 Type: IAX     Subclass: REJECT
[Dec  9 16:04:13] VERBOSE[6448] logger.c:    Timestamp: 00007ms  SCall: 13924  DCall: 16384 [10.0.0.8:4569]
[Dec  9 16:04:13] VERBOSE[6448] logger.c:    CAUSE           : No such context/extension
[Dec  9 16:04:13] VERBOSE[6448] logger.c:    CAUSE CODE      : 3
[Dec  9 16:04:13] VERBOSE[6448] logger.c:
[Dec  9 16:04:13] WARNING[6448] chan_iax2.c: Call rejected by 10.0.0.8: No such context/extension

Debug from prod system
[Dec  9 16:04:13] NOTICE[20963] chan_iax2.c: Rejected connect attempt from 10.0.0.2, request 'xxxxxxxxxx@default' does not exist

As the log show the prod system thinks the contex is default instead of from- internal.

I changed the debug statement in chan_iax2.c to include context and extension and here is the output

[Dec  9 16:04:13] WARNING[6448] chan_iax2.c: Call rejected by 10.0.0.8: No such context/extension from-internal s

It is clear that the demo system is sending the correct context.