I managed to get FreeRADIUS to work with PEAP and WPA2 authentication using a Linksys WRT54GL wireless router.
The weird problem I'm now having is a follows: If the client logging onto the Wi-Fi network tries to login with incorrect credentials (incorrect user or pass) then he gets an access-reject as expected. However, any subsequent login requests from the same client machine (even with correct credentials) seem to be ignored completely. Other client machines CAN login however. Restarting FreeRADIUS or the wi-fi network interface card of the client does not help at all. The only way I can get the client machine to login again is by rebooting the wireless router.
There you go. Source of the problem is wireless router. Looks like it's cacheing failed authentications. Read router documentation to see how to fix that. Ivan Kalik Kalik Informatika ISP