There's no true "Fullscreen Mode" on the Zune software, but it comes pretty close. If you maximize the window and play a video, all that's left is the taskbar. This is okay with Vista because the taskbar is black, and isn't distracting, but on XP the bright blue taskbar might be a little annoying. If you really want to have a "Fullscreen" mode, maximize the Zune window and hide the taskbar. To hide the taskbar, right-click on it, click "Properties," and check "Auto-hide the Taskbar."
As for the WPA key, maybe your network isn't secured in such a way where the Zune needs a key. I'm not sure about that one, but I can confidentally say that your Zune did not automatically acquire the WPA key.