The Short Answer:
Your password might not meet criteria. It also depends on whether you use a custom encryption key. If so, then you either need to create a 10-digit or 26-digit hexadecimal number (numbers 0-9 & letters a-f) depending on whether you use 64 or 128-bit encryption.
The Long Answer:
A WPA password must be between 8-63 characters long, and must only contain ASCII printable characters
The 2Wire User Guide
for the 2700 states the following:
"You can customize the following wireless settings in the Wireless Security panel.
1. From the Authentication pull-down menu, select an authentication setting: WEP-Open, WEP-Shared, or WPA-PSK.
Note: WPA-PSK authentication is supported only on HG model gateways.
Open authentication allows users to configure their wireless adapter as either Open or Shared; in either case an encryption key is required. Shared authentication allows users to configure their wireless adapter for Shared authentication, which requires an encryption key. WPA-PSK requires that users configure their wireless adapter using TKIP.
2. To use the encryption key that came with your gateway, click the Use default encryption key radio button.
To create a custom encryption key, click the Use custom encryption key radio button. If you select Use custom encryption key, you can define a 64-bit or 128-bit encryption key. For 64-bit encryption, enter a 10-digit hexadecimal number. For 128-bit encryption, enter a 26-digit hexadecimal number. A hexadecimal number uses the characters 0-9, a-f, or A-F
3. Click SAVE"