Be careful not to trust even 256-bit WEP! You can catch packets even from 256bit. WEP is WEP, if you want security more than "a bit secure is better than nothing", use ssh-tunneling instead (don't know if the empeg is powerful enough to serve an ssh-daemon).
If I got it right, we are talking about an hobby-project for sending and receiving playlists and music, not sharing secret documents. So the security even with 128 bit is given for this purpose, or are they so secret? :-)
If the PC serves other things which are secret, forget it. WLAN is as secure as the Internet is: It isn't.

What's about bluetooth? Yesterday I had a meeting with an developer of TDK systems. They have an bluetooth-module including at-style commands. This would be great for the empeg. But let me test it. I will show it then at http://empeg.rowi.net when it's done. It would be fine to hear some opinions from the empeg-cracks, I'm not one the empeg-hardware-geeks.

Rolf