I think most beta teams have been running without security (although a few have run it with security enabled).
I'm surprised you had problems setting it up without security. Do you have
Wi-Fi Protected Setup enabled by any chance?
I know you said you messed with it quite a bit. Can you at least identify at what point in the process things stopped working according to the manual?
FIRST will be using security at the competitions, but the exact method of passphrase distribution hadn't been determined yet when the beta teams asked about it.