Just an update. Went to the Apple store this morning first thing. They took the iphone 5, reset it completely to factory defaults, updated the Sprint service, and was able to connect via wifi to an encrypted network. That's the short answer.
NOW, at first they said, sorry, we don't have an encrypted network to test it on to which I replied, sure you do and so do I. I whipped out my MacBook Pro, set up an encrypted network, had him watch me put in the passphrase and then connected the ipad to it to show it was working. See? Upon seeing the iPhone fail, he then asked if he could wipe it out completely to which I said, what other choice do we have here? I've already tried all the other fixes except for that. It did seem to fix the wifi encryption issue. We'll see if it lasts.
According to the tech, I had apps crashing that were causing the issue (like settings & preferences apps!). He also said that whenever Sprint (not sure if all service providers) updates the service, you will have to reset the phone back to factory defaults. Hmm.
Hope this helps someone out there. If anything changes, I'll post it here.