Do I need to configure anything to enable an engaged tone if an extension is already on a call?
I have recently setup a new system using the FreePBX distro and Sangoma S500 phones and users are asking for the engaged tone to be added because currently the extension just rings.
If call waiting, call forwarding, follow me and voicemail are all disabled, the caller should hear the engaged tone. If not, the Asterisk log should show whether the PBX or the phone is at fault.
If you still have trouble, post the log for a failing call.