I had the same problem; I could see my wireless network but after setting the WEP Passphrase, Network Manager kept asking for the Passphrase again and again. I would get an IP address from the wireless DHCP server but no TCP/IP traffic would pass. Using WICD, I saw odd hex characters being returned.
I worked on this for months. Finally at my wit's end (not far away) I typed in the Passphrase into the window for WEP Key and not Passphrase. It connected immediately.
I had struggled with whether the correct Passphrase was being returned from the Gnome Key and Password App but that was not the issue. This could be a problem with my VisionNet DSL modem/wireless router combo box or it could be a bug in Ubuntu, because the same problem existed in both my 10.04 and 9.10 boxes. It's worth a try if you're desperate.