Is it really true that the 3650 has wap 2.0 while 7650 has only wap 1.2 or what ever it is?

If so what difference does it make? My 7650 shows Vodafone Live no problems.

What is the main performance difference between wap2.0 and wap 1.2? And, as a 7650 owner, what am I missing?

You're not missing very much. The main thing is that the built-in browser ("Services") in the 7650 supports only WML (Wireless Markup Language) pages, but the 3650 supports the WAP 2 definition of XHTML, and as a side effect can also show many regular HTML pages, too).

Could this be why I cannot log into AAS wap pages?

I get to a screen that says Logging in (or something like that, then returns to main screen.