Wow, I almost had the exact same situation on a WinXP Pro machine. I kept getting "Acquiring Network address" and although I did have internet connectivity, my wireless adaptor would reset after a while and I had to repair the connection all over again just to have the same scenario.
I tried releasing and renewing the IP via command prompt ipconfig/release and then ipconfig/renew but to no avail.
I was connecting with the right 64-bit WEP key when connecting to the network, but little did I know, in my wireless network connection properties, under the Wireless Networks tab, in the preferred networks section, I did not have the right WEP key.
Upon pressing the properties button with my preferred network, on the Association tab, in the I verified all the settings in the Wireless Network Key section, replaced the WEP key in both the network key sections, and...problem solved...I was officially "Connected".