I am seeing the same issues and it works fine when I am using 11.10
version.

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https://bugs.launchpad.net/bugs/1014938

Title:
  network manager cannot connect to WPA secured networks

Status in “network-manager” package in Ubuntu:
  New

Bug description:
  After a recent update, I click on a network I want to join, and
  instead of prompting me for a password (or remembering the old one),
  the network-manager immediately reports that it is disconnected.
  Further attempts are unsuccessful.

  This is not a driver problem (I am  typing this message on my wifi
  after disabling encryption). This worked as of 24 hours ago, before I
  applied updates.

  From syslog:

  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Auto-activating connection 
'yayInternet-G'.
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation (wlan0) starting 
connection 'yayInternet-G'
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> (wlan0): device state 
change: disconnected -> prepare (reason 'none') [30 40 0]
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation (wlan0) Stage 1 
of 5 (Device Prepare) scheduled...
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation (wlan0) Stage 1 
of 5 (Device Prepare) started...
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation (wlan0) Stage 2 
of 5 (Device Configure) scheduled...
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation (wlan0) Stage 1 
of 5 (Device Prepare) complete.
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation (wlan0) Stage 2 
of 5 (Device Configure) starting...
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> (wlan0): device state 
change: prepare -> config (reason 'none') [40 50 0]
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation 
(wlan0/wireless): access point 'yayInternet-G' has security, but secrets are 
required.
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> (wlan0): device state 
change: config -> need-auth (reason 'none') [50 60 0]
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Activation (wlan0) Stage 2 
of 5 (Device Configure) complete.
  Jun 18 23:11:09 nano NetworkManager[3479]: <warn> No agents were available 
for this request.
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> (wlan0): device state 
change: need-auth -> failed (reason 'no-secrets') [60 120 7]
  Jun 18 23:11:09 nano NetworkManager[3479]: <warn> Activation (wlan0) failed 
for access point (yayInternet-G)
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Marking connection 
'yayInternet-G' invalid.
  Jun 18 23:11:09 nano NetworkManager[3479]: <warn> Activation (wlan0) failed.
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> (wlan0): device state 
change: failed -> disconnected (reason 'none') [120 30 0]
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> (wlan0): deactivating 
device (reason 'none') [0]
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Policy set 'Wired 
connection 2' (eth0) as default for IPv4 routing and DNS.
  Jun 18 23:11:09 nano NetworkManager[3479]: <info> Policy set 'Wired 
connection 2' (eth0) as default for IPv4 routing and DNS.

  ProblemType: Bug
  DistroRelease: Ubuntu 12.04
  Package: network-manager 0.9.4.0-0ubuntu4.1
  ProcVersionSignature: Ubuntu 3.2.0-25.40-generic 3.2.18
  Uname: Linux 3.2.0-25-generic x86_64
  ApportVersion: 2.0.1-0ubuntu8
  Architecture: amd64
  Date: Mon Jun 18 23:25:38 2012
  IpRoute:
   default via 192.168.1.1 dev wlan0  proto static 
   169.254.0.0/16 dev wlan0  scope link  metric 1000 
   192.168.1.0/24 dev wlan0  proto kernel  scope link  src 192.168.1.3  metric 2
  NetworkManager.state:
   [main]
   NetworkingEnabled=true
   WirelessEnabled=true
   WWANEnabled=true
   WimaxEnabled=true
  SourcePackage: network-manager
  UpgradeStatus: No upgrade log present (probably fresh install)
  nmcli-dev:
   DEVICE     TYPE              STATE         DBUS-PATH                         
         
   wlan0      802-11-wireless   connected     
/org/freedesktop/NetworkManager/Devices/1  
   eth0       802-3-ethernet    unavailable   
/org/freedesktop/NetworkManager/Devices/0
  nmcli-nm:
   RUNNING         VERSION    STATE           NET-ENABLED   WIFI-HARDWARE   
WIFI       WWAN-HARDWARE   WWAN      
   running         0.9.4.0    connected       enabled       enabled         
enabled    enabled         disabled

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