pinging 127.0.0.1 is pinging your system (i.e. localhost), not your router. Your router's IP address is probably something like 192.168.0.1 or 192.168.1.1 for a Class C network. First determine what the IP address is of your router and then try pinging it to see if you can reach it.
Aside from that, I have a wifi-radar profile created to connect to my wireless and use wpa_supplicant as well. My wifi-radar profile specifies IP address (mine is static), ssid, netmask, gateway, dns - that's about it. I do not use the wpa_supplicant option associated with the wifi-radar profile, however I DO use wpa_supplicant. I have a wpa_supplicant configuration file that specifies the necessary options and I start it similarly to yours, however slightly different: 'wpa_supplicant -Dwext -ieth1 -c/etc/wpa_supplicant.conf' (I don't use a space between the -c option and configuration path, and also my wireless is eth1 rather than ath0). I have my wpa_supplicant option added to rc.local for automatic starting during system startup and then I manually enable my wifi-radar after boot.
Any way, that's how I do it and it seems to work. Maybe this will be of some use.