This happens on a vanilla profile and on newly saved networks. KWallet saves the key as a plaintext password.
I am on
Fedora 40 Kinoite
KDE Plasma 6.2.0
KDE Frameworks 6.7.0
NetworkManager 1.46.2
NetworkManager-wifi 1.46.2
Kwallet:
kf6-kwallet-libs-6.7.0-1.fc40.x86_64
kf6-kwallet-6.7.0-1.fc40.x86_64
kf5-kwallet-libs-5.116.0-1.fc40.x86_64
kf5-kwallet-5.116.0-1.fc40.x86_64
kwalletmanager5-24.08.2-1.fc40.x86_64
pam-kwallet-6.2.0-1.fc40.x86_64