It sounds like you don't have a DNS server running on your Win2k8 box. Without a DNS server, you won't be able to connect to the domain. I would guess you are getting your external DNS servers so you can still surf the web and all that.
Log in locally to the Win7 box, try to ping the Win2k8 server by name. If that fails, DNS is the issue. If it resolves, it should resolve with the FQDN servername.domainname. If it only resolves the server name, that would be WINS - meaning your DNS is not there or not working.