Are these servers in a domain? (the same domain)
The DNS name you created for 'Server2':
a) is it a DNS (A) Record to the same IP Address as 'Server1' or
b) is it a DNS (CNAME) to the FQDN of of 'Server1'
Perhaps try Option (b)
Did you disable Strict Name checking in the Registry?
Key: HKLM\System\CurrentControl
Set\Servic
es\LanmanS
erver\Para
meters
Paramater: DisableStrictNameChecking
Value (DWORD): 1
You may also need to set the SPN (Service Principle Name)
setspn -a host/aliasname targetserver
setspn -a host/fqdn targetserver
Have a look at:
http://support.microsoft.com/default.aspx?scid=kb;en-us;Q281308