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I was able to resolve this issue:
I used the 'ODBC Administrator' from %SystemRoot%\SysWOW64\ to setup the connectivity and the issue was resolved.
For 32 bit PeopleTools Applications running on a 64 bit Windows Operating System you should be using the 32 bit version of ODBCAD32.exe located under C:\windows\syswow64 folder.
Note: PeopleSoft supports 64 bit SQL Server 2005 and 2008 for PeopleTools 8.49 and 8.50, but a 32 bit SNAC connection for PeopleTools since Tools applications run in 32 bit WOW mode.