Perhaps the culprit lies within the Drivers that affecting communications?
In as much as I respect the fact that you want to know the "SOURCE" so you can use it to your knowledge in the future, sometimes when it leads to being OBSESSED for knowledge becomes a dead end, thus leads to beating around the bush.
Moving on.... Have you checked this link below? http://blog.astrill.com/index.php/tag/virtual-wifi/
This will show a VPN, BUT it has the same message error that you gave me. Please take a look and see if there's a work around.
Thanks Rick, I agree about getting bogged down focussing on the wrong things. Having a look at your link, it mentions a number of the things that I listed in my original post. You're right, I get the same error msg. It also tells me that this is caused by an outdated driver, which is where things get really screwed up.
The driver I have is the latest I could find when I first found this problem. It's 126.96.36.199 from february 2011. Not very recent. So I go to automatic updates to see if it can find anything more recent. It automatically updates me to a 9.1.something from 2010. That's not an update either. I can't find any drivers on the Qualcomm Atheros website, and the only drivers that i seem to be able to find are from Czech or French sites. I eventually find
188.8.131.529 from last month on some French site and I try installing that. Everything goes smooth, it works, but I still get the same error: "The hosted network could not be started." etc etc.
The netsh wlan show drivers command that your link suggested, (and that I used earlier on my previous drivers, as mentioned in my original post,) again shows that "Hosted Network Supported: YES"
The compatibility chart that that article links to shows my adapter, (Atheros AR9285) in the list of compatible devices.
So everything is telling me that it SHOULD work. Everything of course except for when I try and start it up. The virtual network IS actually showing up in my list of Network Adapters, so it's being enabled, it just won't connect to the network for some reason.
Edit: Ok, so here's something I just tried. Re setting my wifi connection sharing options to try and share it with the virtual wifi, and I get this error message:
"Ineternet Connection Sharing cannot be enabled. A LAN connection is already configured with the IP address that is required for automatic IP addressing."
My LAN adapter is a Realtek PCIe FE Family Controller. Unfortunately, there's no change if I disable the LAN port. It tells me my wifi conncetion is shared, but I have no option to what I can share it to, and the Virtual Wifi Miniport still isn't connected to it.