yes mate the encryption key is correct and it actually connect to the router, but say limited connectivity due to wrong ip address.....does my head in.....arrrggghyou defo got the encryption key password thing right? this happened to me and the problem was the password was 'ALL CAPS' so i just put it in like 'all caps' assuming it didn't matter, did the same thing you described.
what OP are you running?
XP or Vista?
first thing that comes to mind is to see if your automatically assigning yourself a new ip address or not, need to go to the network connections, then right click on the wireless network connection and click properties.
should see "internet protocol (TCP/IP)" down on the list somewhere, click on that and hit the properties button, have a look to see whats selected, if "obtain an ip address automatically" isnt selected, select it.
try thattt