Hi Mark,
I entered my password exactly as I would do on my Macs.
When it was not working for me, it would show that is connected to the correct SSID but it would timeout while "exchanging keys" or something to that effect.
My Airport Express network is "closed" (i.e. it does not advertise itself), it only allows access from known mac addresses (I had added the mac of the PSP beforehand already) and it obviously requires WPA Personal authentication.
As stated previously, under Firmware 2.0 it would timeout "exchanging" keys and after updating to 2.5 it worked in one go without me making any changes to the PSP, nor to the Airport settings.
Regards,
Martin Bokman