If you don't want to return the ipod, and don't want to spend hours of wasted time talking to apple... I think you'll need to replace the router. It's a bad work around, but for $20-$30 you can probably save yourself a lot of time.
Hello all.
I am not sure if this will help with the 2nd gen Touch but it works on my 8gb 1st Gen. I had the exact same problem with my Verizon MI24wr wireless router. The Touch would connect to a WEP enabled network no problem, once I switch on the WPA protection the Touch see's the network but would not let me connect. In doing research and trial and error I found that my router defaults the Beacon Interval to 100ms. Changing this value to 75ms solved my problem. Dial into your router using its IP address and go to your advanced Wireless settings, you should be able to modify your Beacon Interval to 75ms. Hope this helps.
Thanks for the suggestion. I have just installed firmware 2.2 from apple, and it has resolved the issue. With no changes to my network I can log into my DLINK router.
Fantastic!! I followed the suggestion from Death Hobbit and I can now connect to my home wireless network using WPA.
Previously, I could connect my iPod Touch 2nd generation only when my router had no security programmed or with WEP. By changing the Beacon Interval setting from 100ms to 75ms on my Linksys WRT54GS, my problem was fixed. I can now use WPA (better security than WEP)
Many thanks Death Hobbit!
Might be a good idea to give apple this info. http://bugreport.apple.com/
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