I don't know why everyone is so crazy about WPA2. Sure, the security is substantially better (though I'm not sure what you're all doing that you feel you need to hide) but it has one major drawback - outside of computers, almost no other devices support it. This is an especially valid point for the current scenario in which the OP stated the goal was to set up a wireless network for Xbox 360, which does not support WPA2 encryption.
You should definitely encrypt the network but WEP should be more than enough for your purposes and more importantly, will work with all of the devices you may or may not want to connect.
The reason everyone is so crazy about WPA2 is because it's actually not ridiculously easy to crack. I can crack WEP and WPA encrypted routers in less than a day (less than an hour for WEP). I can't crack WPA2, it's that simple.
However, you're correct about the compatibility problems. That's not the standard's fault, obviously, it's the vendors' for not putting support in their products. Most game consoles (including the 360 and the DS) don't have support for anything past WEP, which is absolutely ridiculous. On the other hand, I found Nintendo's response to an inquiry as to why the DS only supports WEP to be particularly hilarious.
Originally Posted by NOA_GREG
We have no plans for WPA at this time.
If your concerned about WEP, turn your computers are OFF after you’ve switch to WEP for the DS. I don’t care if The Lone Gunmen are parked outside your door with a van full of equipment trying to bust in your computer files, they can’t do it if your computers are off. And, yes, your wireless router will still work if your computer is off. Um, unless it’s plugged into the same power strip and you power the whole strip off.
If that’s not an option for you, you may want to get the Nintendo USB WiFi Connector, as it works ONLY with the Nintendo DS, and you can leave your other WiFi router with WPA.
NOTE: The reason the Nintendo DS is compatible with WEP, and not WPA, is that we found WEP to be the most prevalent standard for securing wi-fi connections.
I often have problems with the Lone Gunmen trying to break in to my computer. Last time, I pulled an
xkcd and started editing their TCP stream while they were Googling "breaking WPA2 encryption."
On the other hand, they missed the point; people can still leech your internet connection if your computers are off.