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If you've got as far as DNS stuff then I 'think' the solution will involve getting the DNS right...
Best to ring BT - hopefully they haven't done like Tiscali and outsourced to some third world country with operators who barely speak english and read everything out of a manual instead of knowing anything. Last time I rang the guy even said "hang on, got to read the chapter quickly"...
Ciao.
Right click 'Network Neighbourhood' on your desktop, and choose Properties. Find the TCP/IP entry for the network card, highlight it and then click Properties. Click the 'IP Address' tab at the top. Select the 'Specify an IP Address' option, and enter this number for the IP Address - 192.168.0.1 and this number for the Subnet Mask - 255.255.255.0
Click OK, then OK again. You may be prompted to put in your Windows CD, and will be asked to restart. That's it for your computer.
Xbox Setup
Go into the Xbox Live dashboard, Network Setup, IP Addresses. Change the Configuration from Automatic to Manual. Enter an IP Address of 192.168.0.2, Subnet Mask of 255.255.255.0 and a Gateway of 192.168.0.1
Come out of this menu, back to the previous one. Go to DNS Servers, and again change the Config to Manual. In both the Primary and Alternate DNS boxes, enter 192.168.0.1 (this part will be ISP dependant. Try 192.168.0.1 first of all, and if that doesn't work then put DNS back to automatic. If that still doesn't work, then enter the DNS numbers of your ISP. You will be able to find these server numbers somewhere on your ISP's website. Failing that, ring them up and ask for them).
Exit out of the Xbox Live Dashboard. Turn off your Xbox. That should be it."
From the FAQ. Have you made sure you got those numbers right?