No wifi encryption working on Realtek 8191se
 

I cannot get my Realtek 8191se working on Kubuntu 9.10. As there is no Linux driver I used ndisgtk and RTL 8192se driver from Windows. I first tried Network Manager and then Wicd. I can see wireless networks and get through auth but it stops on requesting IP address. I found on some other forums that it could be encryption problem so I tried switching to 'no encryption' on both access point and Wicd and it's working fine!
Tried both WEP and WPA1/2 and nothing. Tried changing DHCP client from automatic to dhclient and dhcpcd and nothing. Tried changing WPA Supplicant driver from wext to other options and nothing. I'm trying it on a new laptop and I'm so desperate that I'm considering changing to another distribution or even Win. Please help, I'm not a total newbie but I've never got any problem with wifi so far.

iwconfig
lo no wireless extensions.

eth0 no wireless extensions.

wlan0 IEEE 802.11g ESSID:"BTHomeHub2-8XKN"
Mode:Managed Frequency:2.437 GHz Access Point: 00:21:04:AF:59:42
Bit Rate=65 Mb/s Tx-Power:20 dBm Sensitivity=0/3
RTS thr:off Fragment thr:off
Power Management:off
Link Quality:67/100 Signal level:-53 dBm Noise level:-96 dBm
Rx invalid nwid:0 Rx invalid crypt:0 Rx invalid frag:0
Tx excessive retries:0 Invalid misc:0 Missed beacon:0

sudo dhclient
There is already a pid file /var/run/dhclient.pid with pid 4326
killed old client process, removed PID file
Internet Systems Consortium DHCP Client V3.1.2
Copyright 2004-2008 Internet Systems Consortium.
All rights reserved.
For info, please visit http://www.isc.org/sw/dhcp/

Listening on LPF/eth0/00:26:22:3b:f0:25
Sending on LPF/eth0/00:26:22:3b:f0:25
Listening on LPF/wlan0/70:1a:04:3e:c2:41
Sending on LPF/wlan0/70:1a:04:3e:c2:41
Sending on Socket/fallback
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 3
DHCPREQUEST of 192.168.1.70 on eth0 to 255.255.255.255 port 67
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 3
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 4
DHCPREQUEST of 192.168.1.70 on eth0 to 255.255.255.255 port 67
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 10
DHCPREQUEST of 192.168.1.70 on eth0 to 255.255.255.255 port 67
DHCPDISCOVER on eth0 to 255.255.255.255 port 67 interval 7
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 15
DHCPDISCOVER on eth0 to 255.255.255.255 port 67 interval 11
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 14
DHCPDISCOVER on eth0 to 255.255.255.255 port 67 interval 13
DHCPDISCOVER on eth0 to 255.255.255.255 port 67 interval 19
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 10
DHCPDISCOVER on wlan0 to 255.255.255.255 port 67 interval 2
No DHCPOFFERS received.
No working leases in persistent database - sleeping.

That means you associated with AP "BTHomeHub2-8XKN".
Is this AP what you wanted to associate with?
If yes, check or ask if there is DHCP server on this AP, witch suppose to give your computer an IP address.

The AP is correct, DHCP is running on it and is also set on settings on both computer and AP. The problem is most obviously encryption because when you switch to 'open network' with no encryption it is working fine. I remember exactly same problem on Hardy heron when I was trying to connect wireless network but then I was able to sort it out by switching encryption off and setting device access list by MAC address on AP. Unfortunately this AP I'm using now (BT Home Hub) does not give the access list option and I'm not particularly keen on making my network open :)