No WPA/RSN IE in association request

[Project 2k4]

Dear Friends,

I am trying to setup a Linux 2.6.9 AP with 802.11i/RSN/WPA-EAP using 
hostapd-0.2.5 on hostap-driver-0.2.5 with the below FW:

--
Host AP driver diagnostics information for 'wlan0'

NICID: id=0x801b v1.0.0 (PRISM III PCMCIA (SST parallel flash))
PRIID: id=0x0015 v1.1.1
STAID: id=0x001f v1.7.4 (station firmware)
--

Client/Supplicant is Win-XP-SP2.

I am using XP's Zero-Conf thingy, not supplicant provided by PCMCIA 
manufacturer.

I can auth correctly using WPA-PSK by setting wpa_key_mgmt=WPA-PSK, and 
accordingly providing wpa_passphrase=somestring. No prob obtaining DHCP 
address and pinging between AP-client.

But trying to setup wpa_key_mgmt=WPA-PSK WPA-EAP, in order to 
authenticate using PEAP & WPA/TLS (freeradius) fails, repeatedly 
scrolling across screen (hostapd -d /etc/hostapd.conf):

--
STP 00:ab:cd:ef:12:34:d0: No WPA/RSN IE in association request.
--

The remainder of my hostapd.conf file looks like:

--
interface=wlan0
logger_syslog=-1
logger_syslog_level=2
logger_stdout=-1
logger_stdout_level=2
debug=0
dump_file=/tmp/hostapd.dump
ssid=smartapdev
macaddr_acl=0
auth_algs=1
minimal_eap=0
eap_message=hello
wep_rekey_period=300
eapol_key_index_workaround=0
own_ip_addr=192.168.5.1
auth_server_addr=192.168.3.157
auth_server_port=1812
auth_server_shared_secret=test
radius_retry_primary_interval=600
wpa=3
wpa_passphrase=openthisap
wpa_key_mgmt=WPA-PSK
wpa_pairwise=TKIP CCMP
wpa_group_rekey=600
wpa_gmk_rekey=86400
rsn_preauth=1
rsn_preauth_interfaces=eth0
--

Can anyone tip me on what's configured wrong?

Thanks in advance
Jonnas