Alan,
The output indicates that the two APs can see each other.
The problem though is that the 8432 is seeing the 7632 as a 'known adopter'. (which is backwards from what you want)
ap8432-AAEF42#show mint known-adopters
12.F1.98.F7 (This is the MINT ID of the 7632!)
This tells me that you have configured the 7632 as a virtual controller, instead of the 8432. For you, this won't work. The way that virtual controller APs operate, they can only adopt and manage other APs of the same model or models that are considered lower level APs. In this case, the 8432 is a HIGHER level AP, so therefore the 8432 will not adopt to a 7632.
See this chart for the breakdown:
What you need to do is remove the virtual controller settings from the 7632 and then setup the 8432 as a virtual controller.