No, they are not identical. In the second example, the values will be embedded as AppleScript constants. In this case, they are text values, so that means they will be quoted, which will mess up your shell script.
To embed a Panorama formula with no quotes or translation, use this format
So I think your correct code would be:
do script "./VeederRootTelnet.exp ^«LIPAddress»^ ^«LLocationName»^ ^«LReportNumber»^"
I didn't know you could tell Terminal to
do script. Cool! I'll have to try to remember that.