L2TP VPN Error 809 & 789 with Windows 7 x64 – works with Vista and XP

I have a Windows 2008 Server to which I am trying to open a L2TP VPN connection on a Windows 7 x64 client.  I am using a pre-shared key.

I have successfully connected to the Server with a 32 bit Vista client and a 32 bit XP client.  I use the exact same settings, internet connection, firewall, etc. on the Windows 7 64 bit client with no luck. 

I have spent 8 hours searching the internet and attempting different solutions.  I have found a handful of people experiencing this problem.  Common advice is to:

1.  Check firewall settings.

2.  Check that pre-shared key is correct.

3.  Modify registry to allow NAT Traversal with AssumeUDPEncapsulationContextOnSendRule=2.

4.  Make sure “IPsec Policy Agent” and “IKE and AuthIP IPsec Keying Modules” services are running.

I can get XP and Vista clients to connect on the same internet connection so 1 is out.  So is No. 2, I double-checked it and again, it works on other machines.  I did No. 3 and it made no difference.  The services are running as described
in No. 4.

One poster stated that he “restored” his Windows 7 machine and the VPN suddenly started working again.  He did not specify what he rolled back.

Any ideas?  I would be eternally grateful, my world has come to a standstill because of this issue.