Is it possible to set the markup (#prefix and #suffix) around individual radio buttons? I know that I can add these fields to the radio button group, but that would mean that I would be wrapping the entire group, which is not what I want to do.
According to the Forms API matrix you can. See https://api.drupal.org/api/drupal/developer!topics!forms_api_reference.html/7#radio Have you tried some code to see if it does what you are looking for?
You can set '#options' for the radios to be a variable:
$rads = array( 0 => '<span>' . t('Yes') . '</span>', 1 => '<span>' . t('No') . '</span>', ); $form['fldset8']['exp_radios'] = array( '#type' => 'radios', '#options' => $rads, );