Can I deduct the interest paid on a loan for land purchased for a vaction home?

Of course. Interest paid on real estate is deductible.

You can decuct mortgage interest on a first and/or second home if it is a "qualified home," which requires that there be some type of structure - could be a house, a condo, a motor home, a house trailer, boat or similar property that has sleeping, cooking, and toilet facilities. I don't believe you can deduct the mortgage interest on bare property until you have actually started construction - at which point it becomes a qualified home.

The following IRS pub gives more detailed info on deducting home mortgage interest:
Publication 936 (2007), Home Mortgage Interest Deduction (http://www.irs.gov/publications/p936/ar02.html)