Internet and Printer access fine, Not able to connect to Wireless network

I have a 802.11b/g dual ethernet Airport Extreme base station. I have it connected via ethernet to a broadband modem (Motorola) for internet access. I also have an HP PSC 2200 connected via usb. I can connect by G4 laptop to the Motorola and have internet connection and can use the HP printer connected to the Airport.

I just did a soft reset on the airport and setup a wireless network with the Airport Utility. The G4 laptop and my iphone 3GS see the wireless network but when putting in the password, I get a Connection failed on the laptop and nothing on the iphone.

I would really like to connect my laptop and iphone via the airport wireless network. I am also not understanding why I can print without connecting to the wireless network?? What am I doing wrong?