as http://wiki.openzaurus.org/FAQ#WiFi_related_questions states under WPA encryption support, the card's station firmware must be at least 1.7.0 to do WPA.
it further links to a page ( http://linux.junsun.net/intersil-prism ) describing how to update your card's firmware, but not without saying that oz doesn't provide a hostap driver with support for flashing firmwares.
unfortunately, this appears to really be the case: the userspace tool (prism2_srec) is available and able to check for firmware compatibility, but it seems the kernel driver (is this hostap.ko ? or hostap_cs.ko ?) isn't compiled with support for fw flashing.
i can understand this: "we do not want to hear that users bricked their cards by mistake", but in some other way it reduce the freedom of users to willingly update their cards or brick them (if they really like to ;-) ).
i was a bit unsure to report this as a bug, as its a mere feature wish, and i'm not sure if this would ever qualify as a candidate for the 3.5.4.x upgrade feed, so i started a new topic.
to sum this up, i think the most probable solution is someone building a special hostap kernel module with this feature enabled. as i don't have an OE environment and fear a bit setting it up, i carefully ask people that have one to do this. if you have some spare computation time, i (and probably others) would be quite delighted to be able to update their cards to do WPA.
muchas gracias in advance...
PS: i have a c760 with (by now) 3.5.4 installed. think the situations is the same in 126.96.36.199. (at least according to pacthes in OE repo).