Hi,
The AP on the same subnet as the controller shouldn't be a problem.
It might help to see controller and switch configurations and output of 'debug client enable' from the controller when the client associates.
Otherwise....
I'd verify the following:
1. Does the client get an address with no security enabled on the wlan?
2. Is the switchport to which the controller connects configured as a Trunk port and allowing the required vlans?
3. Is the WLAN configured to use the correct interface?
4. Is the dynamic interface configured with the correct dhcp server?
If all those are correct, then try pointing the dynamic interface to the controller's management address for dhcp and create a local dhcp scope for the clients on the controller itself. Does that work?
Best Regards,
Ben