IAS PEAP MSCHAP v2 authentication issue

I have IAS setup, Server 2003 standard with a Thawte certificate to
authenticate Wireless XP SP1 clients via Cisco 1200 AP's. When I logon to the
client I usually can pull a valid IP address and the system log on the IAS
server shows the client and user granted access. The issue is that after
about 20 seconds the user id is denied access and the IP address is dropped
from a valid one to a 169 ip address. I have a group policy setup at the
laptop OU with the wireless policy.

In the system logs I see that the user and client were granted access then I
see a bunch of errors per the below:

Reason code 96- the authentication request was not processed because the
session timed out.

If I leave the client on it will authenticate again several times but it
will drop off after each authentication.