With the help from kineq from the http://tech.groups.yahoo.com/group/FT3563-BT mailing list, I manage to get the network device working. The correct setting was Virgo (Two Macs) option.
I also managed to update the WAP200 source code to 22.214.171.124 by patching it one by one using the patch from kernel.org. You can find the patch in the groups mailing list or here: http://tinyhack.com/files/patch-from-kernel-126.96.36.199-to-star.bz2. Download the latest 2.4 kernel, then apply the the patch.
Update: this is not very stable, I don’t know whether because of my kernel options, my current binaries, or something else.
I am still working to make this better.