Because you are "connected" but not authenticated? I have that happen with public wifi that is prompting me for passwords and such.
Did you set up the router or did someone else?
you know the channel - but do you know the password?
Has it ever connected to wifi anywhere? Upgrading to 3.0 might help - there are threads on this around, but i'm hesitant to say you might have a major issue because i'm not clear that you are indeed typing the correct info in the right spots.
Maybe this can jump start you?
http://support.apple.com/kb/TS1398