I was researching the "The driver doesn't support the version of ODBC behavior that the application requested" error and found
https://forums.asp.net/t/1323565.aspx?+Logon+failed+Details+IM002+Microsoft+ODBC+Driver+Manager+Data+source+name+not+found+and+no+default+driver+specified+
I know it is not related to PeopleSoft, but User fixed similar problem by changing DSN type. That is why I suggested to try.