Apple tv not connecting to internet

I recently bought an apple tv 2 in the states (I leave in London), and was expecting the setup to be as easy as all my other devices (I have an apple tv which is 3 years old and works fine)
when I try to connect to my wifi network, the setup screen tells me I am connected to the network, but not to internet.
I do not think I am even connected to the network as I do not see my device in iTunes, and cannot enable home sharing.
I also do not see the new apple tv when I admin my router (a o2 wireless ii).
Googled the issue, and it seems I am not the only one in that situation, but I am yet to find a solution that works.
Any ideas??
thanks a lot.

Thanks a lot for the prompt response.
all my devices are following the pattern: 192.168.1.XX
my apple TV is of the form: 169.254.161.116
my network is on the protocol: 802.11b/g
and I have this setting turned on:" Allow multicast from Broadband Network"
Cheers.

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Message was edited by: Ed Fladung
Message was edited by: Ed Fladung

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