I have the same problem with a fresh an up to date Hardy installation. With the network manager, the wpa pass phrase is not recognized when it includes special characters (French "é" in this case).

Logs example:

Jun 20 10:51:40 lsi-laptop NetworkManager: <info>  Activation (eth1) New wireless user key for network 'Stratic' received. 
Jun 20 10:51:40 lsi-laptop NetworkManager: <info>  Activation (eth1) Stage 1 of 5 (Device Prepare) scheduled... 
Jun 20 10:51:40 lsi-laptop NetworkManager: <info>  Activation (eth1) Stage 1 of 5 (Device Prepare) started... 
Jun 20 10:51:40 lsi-laptop NetworkManager: <info>  Activation (eth1) Stage 2 of 5 (Device Configure) scheduled... 
Jun 20 10:51:40 lsi-laptop NetworkManager: <info>  Activation (eth1) Stage 1 of 5 (Device Prepare) complete. 
Jun 20 10:51:40 lsi-laptop NetworkManager: <info>  Activation (eth1) Stage 2 of 5 (Device Configure) starting... 
Jun 20 10:51:40 lsi-laptop NetworkManager: <info>  Activation (eth1/wireless): access point 'Stratic' is encrypted, and a key exists.  No new key needed. 
Jun 20 10:51:41 lsi-laptop NetworkManager: <info>  SUP: sending command 'INTERFACE_ADD eth1^I^Iwext^I/var/run/wpa_supplicant0^I' 
Jun 20 10:51:41 lsi-laptop NetworkManager: <info>  SUP: response was 'OK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: sending command 'AP_SCAN 1' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: response was 'OK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: sending command 'ADD_NETWORK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: response was '0' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: sending command 'SET_NETWORK 0 ssid 53747261746963' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: response was 'OK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: sending command 'SET_NETWORK 0 proto WPA' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: response was 'OK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: sending command 'SET_NETWORK 0 key_mgmt WPA-PSK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: response was 'OK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: sending command 'SET_NETWORK 0 psk <key>' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: response was 'OK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: sending command 'ENABLE_NETWORK 0' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  SUP: response was 'OK' 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  Activation (eth1) Stage 2 of 5 (Device Configure) complete. 
Jun 20 10:51:42 lsi-laptop NetworkManager: <info>  Old device 'eth1' activating, won't change. 
Jun 20 10:51:46 lsi-laptop NetworkManager: <info>  Supplicant state changed: 0 
Jun 20 10:51:46 lsi-laptop NetworkManager: <info>  Supplicant state changed: 0 
Jun 20 10:51:47 lsi-laptop NetworkManager: <info>  Old device 'eth1' activating, won't change. 
Jun 20 10:51:52 lsi-laptop NetworkManager: <info>  Supplicant state changed: 0 
Jun 20 10:51:52 lsi-laptop NetworkManager: <info>  Supplicant state changed: 0 
Jun 20 10:51:53 lsi-laptop NetworkManager: <info>  Old device 'eth1' activating, won't change. 
Jun 20 10:51:58 lsi-laptop NetworkManager: <info>  Supplicant state changed: 0 
Jun 20 10:51:58 lsi-laptop NetworkManager: <info>  Supplicant state changed: 0 
Jun 20 10:51:59 lsi-laptop NetworkManager: <info>  Old device 'eth1' activating, won't change. 
Jun 20 10:51:59 lsi-laptop NetworkManager: <info>  Activation (eth1/wireless): disconnected during association, asking for new key. 
Jun 20 10:51:59 lsi-laptop NetworkManager: <info>  Activation (eth1) New wireless user key requested for network 'Stratic'. 
Jun 20 10:52:05 lsi-laptop NetworkManager: <info>  Supplicant state changed: 0 
Jun 20 10:52:24 lsi-laptop last message repeated 7 times
 

My system is configured in French. If i remove the special character from the  pass phrase on the access point, then everything works well. But I can't change the pass phrase. I am not alone...

Is there a workaround for that ?

Remark: Currently, wpa with pass phrase is unusable under Hardy for me and more generaly for foreign languages which use accented characters. When looking at open bug reports, it seems that there is lot of similar problems reported (rejected keys).