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It's my understanding that everyone on the same Wifi protocol has full access to each other host that it is connected to.

Is there any Wifi technology that allows for partitioning and isolation of each individual client... at Layer 2?

Ideally this will work even when everyone knows what the shared secret is.

I'm thinking that once a "normal" wifi session is set up, a tunnel of some sort would be enabled on the Wifi router itself to the client. Perhaps the key exchange used in HTTPS could be ported to Wifi to allow this tunnel to be created.

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You might be interested in this talk that was given at DEFCON a few years back.

Summary: if you are using WPA2, a separate key is used to encrypt broadcast traffic vs. unicast traffic. So in that sense, connections are isolated from each other. HOWEVER, you're still vulnerable to an insider attack; a malicious client could spoof ARP and intercept traffic from another client.

But that's why you get an access point that allows you to enable client isolation (if you care about that threat enough).

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