According to this cisco documentation (last bullet under 802.1x Host Mode):
...it is not possible to have an auth fail vlan to fall back on in multi-auth host mode when clients can't authenticate. I know this applies to 802.1x, but would it also apply to standalone mab? Is anything being done to enable this limitation in future ios releases? I ask because HP procurve switches have no problem running in a mode like this. Any thoughts are appreciated.