New finding: I hard rebooted the iPhone and when it came back it connected fine to the wireless routher. But after few hours it lost the wireless connection again.
Wireless router and iphone are located in the same room.
I just bought this router and configured it as:
-SSID broadcast
-No Mac filtering.
-Open Air with WEP
-DHCP enabled
So far Im able to connect my wireless devices through this router except iPhone 3gs. iPhone has wireless enabled and do a search for wireless networks and does find other...