Yes my router is using wep encrytion
Try and set the KEY to 26 digit HEX code for the WEP. I'm also running dd_wrt on my router. I was never able to get my amiga to connect to a ClearSpot router even without WEP. If you can't get it to work see if your router supports dd_wrt. Depending on your router, installing dd_wrt can by very simple(if you are lucky), or rather complex and in that case, if you don't follow instructions to every detail you may irreversibly brick your router.
That is what I did to make mine work. My wireless NIC (from Amigakit) even works great with ShapeShifter.
Under the Amiga I have samba set up so I can attach to shares on my mac and windows7 notebook. its pretty nice

good luck
-nate