Mac Mini doesn't share its internet connection

HI,
I have a Mac Mini 3,1 (intel core 2 duo, 2GHz), with Snow Leopard 10.6.8, and an inbuilt AirPort Extreme with the Broadcom BCM43xx 1.0 (5.10.131.42.4) firmware.
I am trying to share its ethernet connection to the internet with an iPhone 3GS via WiFi. I am able to turn on internet sharing. The iPhone recognizes the wifi link and I am able to connect the iPhone to the computer.
However, when I bring up Safari on the iPhone, the iphone timesout trying to go to any webpage, even a simple one like www.google.com. In the Network settings on the mini, the Ethernet link shows the green "connected" symbol, but the airport link shows the amber "self-assigned IP" symbol.
I have tried connecting the iPhone in exactly the same manner with a current generation iMac and it browse the internet with no trouble at all. Why won't the mac mini work as flawlessly as the iMac? Can anyone help?
jameseg

Yes, Ethernet is at the top of the connection list. See picture.
Airport is also on.
Internet sharing is on.
No encryption (i.e. no WEP is being used). And the channel is set to automatic.
Moreover, the airport network settings are set to DHCP and I have tried renewing the DHCP lease.
Any ideas? I have trolled the forums and have found no solution. I've tried selecting specific channels, I've tried DHCP with a manual IP addres, I've tried with and without encryption. I've also tried creating a computer-to-computer network with the iPhone. Nothing seems to work.
Yet, when I use internet sharing on an iMac running SL 10.6.8 everything works fine.

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