RT-N66U early model that needed to boot update.
Same experience was with the .38 release.
5 ghz clients which do connect with 372.31 or older versions will not connect IF WPA2 Enabled.
No security, all clients connect.
Talking iPHONE 5 and Broadcom dual mode chipset in laptop.
WPA2 2.4ghz channel works fine for all clients.
Roll back to 372.31, every client connects just fine on all channels with WPA2.
Did full resets and removed wireless accounts on clients and reconnected, re-entered WPA2 key, etc.
Wish it worked of course.
You should start a new thread on your issue. I have ipad mini non retina which uses the same Murata wifi SoC module (consisting of Broadcom BCM4334 etc..) as iphone 5 and don't have any problem with .38 or .39 with either the regular .39 version or .39 em version. I also have Broadcom 2x2:2 wireless adapters on computers and they don't have any problem either.
The fact that you cannot update the firmware without going in to recovery mode possibly suggests some procedural issue to your update. I have RT-N66U ver. B1 and don't have any problem updating firmware.
Try the universal basic troubleshooting steps in link below. They fix a wide variety of problems. Don't do a 30-30-30 reset. Just do a regular plain jane factory reset by pressing and holding the reset button for more than 5 seconds.
http://forums.smallnetbuilder.com/showthread.php?t=12453