Having seen many posts about Netgear's WG311 connecting to a WIFI OK but stopping internet access whenever wireless encryption is enabled; AND after working many frustrating hours on this problem, I supply what finally worked for me here. I think this applies to PCs with SP2.
I couldn't get my WG311 V1 to work on a Windows XP Pro desktop (with WEP on) with either the NetGear setup utility or using Windows to manage the WG311 adapter. I could connect to my WIFI NW, but with WEP on, I had no internet access. Discovering apparently that my WG311 V1 adapter is not compatible with "Windows "Zero Configuration" (WZC) I solved the problem by turning Windows Zero Configuration off first THEN use the NetGear utility to connect to my WIFI and setup the WEP encryption.
Go here
After disabling WZC, and then setting up my WG311 using Netgear's utility to enable WEP, my WIFI connection works flawlessly including internet access.
Hope this is helpful.
Dennise