Is using SHA256 to extract entropy from a p-rand nonce a good way to create keying material? Using $SHA256(N)$, where $N$ is 64 bytes of output from the Microsoft Windows CryptGenRandom function. Are there any known vulnerabilities with using this method to create key material? Should $N$ be more than the SHA256 block size of 64 bytes? Aligning to block size means 2 passes through the (internal) hashing function, (block and finalize), is this enough?
CryptGenRandom is supposed to produce cryptographically strong random numbers, so you shouldn't need to process it before using as a key.

However, if you want to treat it as of suspect quality, I would go with SP 800-90B recommendations: assume it has entropy at least half the bits, so request double what you need. Then run it through HMAC with a suitable hash function.