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802.1x Authentication Question

Hi All,
I just have a question regarding wireless network authentication:

Here is my test setup.
Windows 2003 Server Standard Edition running the following:
Certificate Authority, Active Directory, IAS Server, DNS, WINS and IIS Toolkit
Cisco Aironet 1130AG wireless access point.

So far I have got the Cisco Access point authenticating users using Protected EAP, under the settings of the client I am requesting the client verifies the certificate I self signed using the IIS toolkit.
The authentication method is set to EAP-MSCHAP v2

Now the question: When a wireless client authenticates using PEAP + EAP-MSCHAP v2, does the client create a secure tunnel to the radius server?

If so does this mean that if I were in London and my wireless client was in Manchester a secure tunnel would be created from Manchester to London and then back again before accessing local network recourses?

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