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Anyone have any ideas why the laptop can see but not connect to the Linksys router?
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Yes it's because your Linksys router is broadcasting its SSID value which the second laptop can see but can't negotiate the encryption for so hence can't attach to. Open and Shared refers to WEP (wireless equivalent privacy) encryption which is not particularly effective but better than nothing WPA is far better, PSK stands for Pre Shared Key which is a form of WPA where you manually specify an initial encryption key on both the laptop and the router.
Now reading through the posts it looks like that the second laptop can't connect even with encryption swiched off. If so then I'd be tempted to condemn the Actiontec adapter. In theory they should all conform to the standards and anything should work with anything else but in practice it never quite works out like that. I'd recommend that you get yourself a new PCMCIA wireless card for the second laptop and forget USB. If you can get a Linksys card then it's virtually guaranteed to be compatible. Use WPA-PSK if you can and you should be good to go.
Good luck
John