I've noticed this bug myself in OS 2006. It will only accept up to 63 chars for the WPA key. I just truncated the key I use to 63 chars, but I guess that doesn't work for you.

A couple of things you could try are to find the config file where the key is stored and try to set in manually instead of using the UI or seeing if this bug is fixed in the 2007 OS HE.