Thanks for your help so far. I have gone through the guide to check my steps (though many were already completed since this machine is already our DC and already had NPS installed). As per your recommendation I also set manually the connection settings on my Windows 7 client with the following settings:
Security Type: WPA2-Enterprise
Encryption Type: AES
Network Authentication: Protected EAP (and Unchecked "validate server certificate")
Authentication Method: EAP-MSCHAP v2 (using domain credentials)
I believe I am getting a little further now. I am still not able to connect with termination disabled, however I was able to retrieve the following logs using the "show auth-tracebuf" command:
Jul 11 10:12:47 station-up * 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa - - wpa2 aes
Jul 11 10:12:47 eap-id-req <- 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa 1 5
Jul 11 10:12:47 eap-start -> 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa - -
Jul 11 10:12:47 eap-id-req <- 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa 1 5
Jul 11 10:12:47 eap-id-resp -> 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa 1 49 host/win7machine.mycompany.com
Jul 11 10:12:47 rad-req -> 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa 43 253
Jul 11 10:12:47 eap-id-resp -> 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa 1 49 host/win7machine.mycompany.com
Jul 11 10:12:47 rad-reject <- 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa/192.168.221.30 43 44
Jul 11 10:12:47 eap-failure <- 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa 1 4 server rejected
Jul 11 10:12:47 station-held * 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa - -
Jul 11 10:12:52 station-held * 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa - -
Jul 11 10:12:57 station-held * 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa - -
Jul 11 10:13:02 station-down * 58:b0:35:7d:7b:87 d8:c7:c8:f8:2f:aa - -
From this I gather that the request is actually being rejected at the RADIUS server because of some error in the way I have EAP configured, but I am still not sure what that is. Is there somewhere on the Windows 2008 box I can check for more detailed logs that would reveal the root of the problem? I checked the event viewer, but did not find any details.