I have finally managed to fix this issue on my home Windows 2008 R2 ADS install.
Synology CS407 running 2.3 1141 firmware
Windows 2008 R2 ADS in native 2008 R2 mode (single DC with all FSMO roles and GC)
Windows 2008 member servers
Windows 7 Ultimate clients
When upgrading DC and AD from 2008S to 2008S R2, authentication breaks with Synology NAS giving error 'No process on the other end of the pipe:', local auth still works.
To Resolve it:
Delete the computer account for the Synology NAS (if you had joined it before domain upgrade)
Go onto the DC and open up Group Policy Management Console
Navigate to the Default Domain Controllers policy
Navigate to 'Policies>Administrative Templates>System>Netlogon>Allow Cryptographic Algorithms Compatible with NT4.0' SET TO ENABLE
type 'gpupdate /force'
start services.msc >restart NETLOGON service (You could reboot instead of this step)
Join the Synology to the domain as normal, use the NetBIOS name and the FQDN and DC IP address
Re-assign permissions to shared folders using 'Domain Users' or 'Domain Groups'
Hey Presto... Success.
Now for the warning... This will lower the security of your DC so that it supports weaker encryption for session and key negotiation. There is obviously a risk/reward decision to make here.
Personally, I feel it is worth the risk to get my NAS working as I am confident that my internal network has no bad people running about on it. If this is a work system, then you should apply your normal risk management decisoning process.