This really sounds to me like an incorrect passkey. You'll have to tell Windows to forget the network you're connecting to and then reconnect, being very careful to enter the correct password. I can't remember, unfortunately, where in XP the networks are stored.

This has always annoyed me, when Windows takes the password, doesn't complain that it's wrong, you can't connect, and then it doesn't give you the option to re-enter your password. Bad design.

You might also try making your network password 13 characters long. Sometimes Windows doesn't like it otherwise.

*edit*
From a little research, it's here:

Control Panel
Network and Sharing Centre
Manage Wireless Networks
<Delete network>