I'd like to upgrade my WiFi from "WPA2 Personal" to "WPA2 Enterprise" mode because I know that in principle, on a WiFi secured with "WPA2 Personal", devices who know the PSK can sniff on each other's traffic once they captured the association between the station and the AP. In order to reduce the effect that a single compromised device on the WiFi would have (in "WPA2 Personal" mode, it would be able to decrypt other, uncompromised WiFi client's traffic, if it had before captured the "associated requests" from the other clients in promiscuous/monitor mode) I'd like to upgrade my WiFi to "WPA2 Enterprise" security, where, according to my understanding, this is no longer possible.

Now, unfortunately, for "WPA2 Enterprise", you need a RADIUS server.

Now, as far as I understand, the RADIUS server only performs authentication, but does not perform encryption or exchange of key material. So basically, an AP gets an association request from an STA, the client provides credentials, then the AP passes them to the RADIUS server, the RADIUS server says "credentials are OK", then the AP lets the STA associate, otherwise not.

Is this the right model? If so, then the RADIUS server is basically nothing but a database full of user credentials (username and password pairs). If this is so, then I'm curious why they require a full-blown server machine for this, since, even for thousands of users, usernames and passwords are not a lot of data to store and verifying credentials is a fairly basic task, so it seems that this is a thing that could also be easily done by the AP itself. So why require a dedicated server for this?

So perhaps I got this wrong and the RADIUS server is not only used for authentication, but for the actual encryption? If an STA sends data to a network using "WPA2 Enterprise", it encrypts it with some session key, then the AP receives the encrypted data, but, contrary to "WPA2 Personal", it cannot decrypt it, so it passes the data on to the RADIUS server, which has the key material (and computational power) to decrypt it. After the RADIUS has obtained the clear text, it then passes the unencrypted material back onto the wired network. Is this how it is done?

The reason I want to know this is the following. I have a rather old device here, which has a RADIUS server running on it. But, like I said, the device is pretty old and thus implements an old version of RADIUS with known security weaknesses. Now I'd like to know whether this would compromise my WiFi security if used for "WPA2 Enterprise" mode encryption. If an attacker can talk to the RADIUS server when not authenticated, this might compromise my network's security, so I should not do this. On the other hand, if the attacker can only talk to the AP, which in turn talks to the RADIUS server for checking the credentials, then a "vulnerable RADIUS server" might not be much of a problem, since the attacker wouldn't get into the WiFi network, and thus wouldn't be able to talk to the RADIUS server, in the first place. The only device talking to the RADIUS server would be the AP itself, for checking the credentials, with all the key material generated and cryptography performed on the (uncompromised) AP itself. The attacker would get revoked and thus not be able to join the network and exploit weaknesses on the potentially vulnerable RADIUS server.

So how exactly is the RADIUS server involved with "WPA2 Enterprise" security?