This is due to a bug with IE7 and IE8's change events. You should instead listen to the click
event.
As shown in this table on quirks mode, the change event on radio buttons and checkboxes is quite buggy in IE7 and IE8.
You can listen to the click event like so:
<input type="radio" name="Q12" value="radio" id="Q12_0" onclick="nextPnl('Q12');">
<br>
<input type="radio" name="Q12" value="radio" id="Q12_1" onclick="nextPnl('Q12');">
And a fork of your fiddle: http://jsfiddle.net/T7VYL/
Usually, using a javascript library such as JQuery and YUI make your life easier, although from my testing, they do not fix this bug in older versions of IE.
If you would still like to listen to the change event, you can deploy this fix: http://www.ridgesolutions.ie/index.php/2011/03/02/ie8-chage-jquery-event-not-firing/. Basically it listens for the click event, and then causes the element to fire a change event.
As demonstrated by the asker's fiddle: http://jsfiddle.net/3zwur/3