Error Messages:

Windows Server 2008:
Connection Failed
The iSCSI name specified contains invalid characters or is too long.

Solution:
This issue drove me crazy. I checked the firewall, connectivity, event viewer but didn’t come across anything that would indicate the real problem. I finally checked the log for FreeNAS and didn’t see anything that would indicate what is the problem. After a reboot on the Windows machine and trying again the following warning message showed up in the log which shed light on the issue:

FreeNAS Log:
istgt[2330]: istgt_lu.c:1232:istgt_lu_add_unit: ***WARNING*** TargetName iqn.2007-09.jp.ne.peach.istgt:SQL_Log contains an invalid character.

As you can see in the error message I had named the target as SQL_Log and it looks like the underscore caused the problem! Removed the underscore and fixed the issue..