It seems that ipw2200 some sort of automatically supports nl80211 but it doesn't report any encryption capabilities back to userspace or at least not in a way network-manager understands (see nm's src/wifi/wifi-utils-nl80211.c) I reported this bug to ubuntu developers. They asked me to file this here. https://bugs.launchpad.net/ubuntu/+source/network-manager/+bug/971628 https://bugs.launchpad.net/ubuntu/+source/linux/+bug/973241
This bug does exist in a kernel compiled from linux-stable.git using tag v3.2.14.
Assigning to myself.
The posted patch fixes the problem I reported, but if that's fixed nm still doesn't show the signal strength of the connected network I guess (because once created using some patch nm can connect to this network but doesn't show any signal strength). I'll file another bug if I really run across that problem. Not a show stopper anymore but not working either. As was said: probably will not work through nl80211.
A patch referencing this bug report has been merged in Linux v3.5-rc1: commit a141e6a0097118bb35024485f1faffc0d9042f5c Author: Stanislav Yakovlev <stas.yakovlev@gmail.com> Date: Tue Apr 10 21:44:47 2012 -0400 net/wireless: ipw2x00: add supported cipher suites to wiphy initialization