I've had situations where I'd typed the wrong passphrase in at both ends (repeated typo) and then a 3rd box would not connect with the "correct" one. But, it sounds like you didn't set the router end passphrase.
Another possibility is your firewall on the computer. But, I think this is less likely than a passphrase and mode issue. Make sure it's WPA2.
If this works with a static IP on the computer then maybe there aren't enough DCHP addresses to go around and they are all leased out?