I confirm I have the same problem.

When I try to connect to my WPA, network-manager asks me for the
password. A few seconds later, network-manager asks me for the password
again (of course, I am sure the password is correct) and I can see in
the password field the WPA-PSK instead of the ASCII passphrase.

However, I am not sure it is a network-manager problem. I also tried to
establish the connection with /etc/network/interfaces (without using
network-manager) but I am still unable to connect to my WPA. The
association between my SSID and my encryption key seems to be non
persistent and breaks in 10 seconds. Successive calls to 'iwconfig' show
me that etheir the SSID or the encryption key goes away. It is something
similar to this: https://bugs.launchpad.net/bugs/293869

I think  there may be a link between these two bugs because I have them
both. When I use the 'wl' driver directly, the connection breaks
immediately (https://bugs.launchpad.net/bugs/293869 ?) but, when I use
ndiswrapper to fix the problem, I have the problem we are discussing
here.

-- 
network manager/wicd turns wireless password to hex in jaunty still
https://bugs.launchpad.net/bugs/377643
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