I strongly believe there is a bug in the LG Wifi software. I have an Optimus V (Virgin Mobile), VM670ZV4, with Froyo 2.2.1, Kernel 2.6.32.9, Build FRG63.
It does not process DHCP correctly. I can see from my DD-WRT status page the phone attempts to request an assigned IP address for the phone's MAC address. Thus the password and WPA encryption is working. But the lease time is only 60 seconds instead of the router's 21 day default. After a minute the IP request is shown failing on the phone and it marks the SSID as "disabled" which is meaningless because it will try to connect again and go through the same unsuccessful cycle. The same DHCP failures happen on any other encrypted WIFI that I have tried, not just mine.
But if I change the IP address to fixed, everything works fine. So it is not the WPA aspect per se (and yes the Wifi sleep options is turned off on the phone). It also works on any unencrypted Wifi connection. So the problem is specific to DHCP on any form of encrypted link.
This is actually my second phone. Virgin Mobile replace the first one that developed really bad habits like refusing to connected to the 3G network. Furthermore, the first one had acted as above until I did a factory reset. Then it ignore the fixed IP address and always tried the unsuccessful DHCP cycle. So there was no way to use my home network.
I am curious if anyone has successfully used a Optimus V with an encrypted router without a fixed IP address?