You have a few problems in there. You shouldn't have 2 files controlling one thing, and in this case you do have that, possibly causing a problem as the /etc/wpa_supplicant/wpa_supplicant.conf file fights with the /etc/network/interfaces file. I also think you have way too much going on in your wpa.supplicant.conf file, and bet you'll get better results by trimming it down.
First off, don't put anything about a particular ssid in your /etc/network/interfaces file. That file effects your interface all the time, so with the ssid wrapped in there, you'll never be able to authenticate at a coffee shop or wifi hotspot. I'd make that file look like this for the wireless card:
iface wlan0 inet dhcp
With that cleaned out, lets compare our wpa_supplicant.conf files - yours:
eap=PEAP TTLS TLS
jim@jimsworktop:~$ cat /etc/wpa_supplicant.conf
### Example of basic WPA-PSK secured AP
That authenticates against a wpa2 network without issue on my system. I'm going to suggest you trim down to the bare minimum, and then add things in piece by piece as necessary. Here's how I would start:
eap=PEAP TTLS TLS
You may not need the key_mgmt, eap, or phase2 lines either. Then we've got to get this running on the terminal, and that also should spit errors that the GUI sometimes isn't so easy to spot.
You do need to call wpa_supplicant with -Dmadwifi for your setup, wext would be if your card worked with just the kernel and firmware, basically without madwifi.
So here are some commands:
wpa_supplicant -iwlan0 -Dmadwifi -c/etc/wpa_supplicant/wpa_supplicant.conf
(watch the output (not backgrounded) then when it completes, open a 2nd tab or terminal)
If the wpa_supplicant line doesn't complete the handshake, add more junk in. I no longer provide support for the place where I did PEAP wireless auth, but it was a simple file like mine, maybe one or 2 additional options, not 12 of them though.
Please post back with problems.