So, I recently got a iPod touch, but have been unable to connect to a Netgear router (Wireless-N 300, WNR2000v2) unless I use static IP. This is the first clue that there is something wrong with DHCP or routing table, not with WPA or WEP.
I had it setup as a switch rather than a router, and is relying on another DHCP server (DHCP passthru). It turns out you need to turn on RIP Version. This setting is found under “Advanced” > “LAN Setup”. The RIP version is “Off” by default. I selected RIP_1 and apply the settings. Now it works.
The other quirk that I have experienced is that for some routers, if you use WEP, you need to enter the long HEX key, rather than your passphrase for this to work.
Mopy 