My house mate had a similar problem. We each have a computer connected to a router. He was using win XP and was trying to connect to the router via a G202 wireless usb adapter while I was connecting via a standard ethernet cable. The router is in my room so I don't mind a cable and well my OS is a bit flakey with wireless.
When he tried to access the router the connection would cycle connect/disconnect. We tried an ethernet cable and he got the "limited connectivity" warning. I had no problems, except sometimes I lost WAN side access but could still see the router (only during the occassions he was trying to connect to the router).
Our router has a "bandwidth manager". I turned it off. Both connections work perfectly now. I thought it would be worth pointing this one out. Perhaps it is not as helpful to this discussion but with people experiencing similar issues this is worth a try. Router model: Zyxel P660HW. Got to Advanced -> Bandwidth MGMT -> uncheck for LAN, WLAN and WAN. Check out the settings in your router maybe there is something similar.
LG