I know this thread is quite old, but I wanted to include another possible cause because Google searches seem to bring you back to this thread.
I was experiencing the same issue with my Windows 7 Fog clients, and resetting the encryption data did nothing. It turned out to be the time was quite off on the client, so it was never able to authenticate with the Fog server. Once the time was corrected, the client connected and everything worked fine (hostname, join, etc.).
Just in case someone else runs into this issue, hopefully this can save you some time.