I notice that wep encryption is switched off according to what you said earlier. Its not switched on at the router is it?
Also whats your SSID (Kinda like a wireless network name), you always have to specify one of these, if its not Identical on both machines it will not allow you to connect (Its case sensitive too, i.e. the word FART is not the same as fart or FaRt, fArT, FARt you get the Idea
)