Some people have quite a few problems connecting devices to a WEP encrypted wireless network.
One of the problems with WEP is that the actual standard relies on a 10 character HEX key for 40bit WEP and a 26 character HEX key for 128bit WEP.
In order to make things easier for people, vendors use certain algorithms to convert simple alphanumeric passwords (or passphrases) into HEX keys, thus enabling people to use simple memorable WEP password rather than lengthy HEX keys.
The problem is that different vendors use different algorithms to generate the HEX key and therefore a ASCII password on an AEBS will be hashed differently on a Netgear client and vice versa.
One thing is a 13 character 128 bit WEP password will be hashed by all vendors in the same way (if you use 40bit WEP then a 5 character password is required).
Though sometimes not even that works and the HEX key must be used regardless.
Having said all that WEP is considered today to be insecure and not recommended (it can be broken quite easily by a determined hacker) if you can use WPA. However if you have legacy devices which don’t support WPA then WEP is sometimes all you can use.
I was very surprised that Internet Sharing in Leopard did not add the ability to use WPA/WPA2.
It seems that for ad hoc networks we are stuck with WEP 🙁
With internet sharing, it’s not a software issue, it’s a hardware limitation I believe.