Time Machine's WAN port doesn't light up, but Ethernet port does

Hi there,
We have a guest sleeping in the spare room where our Time Machine is also located and because of they are a light sleeper we've had to turn off the power at night. I've then noticed that it has become more and more difficult to setup my internet again.
Firstly, when I powered it back up, it began to flash amber and wouldn't recognise the modem plugged into the WAN. My first approach was to turn everything off and then turn them on again. This had worked the first few mornings after having the issue. But this method doesnt seem to fix the problem anymore.
Regardless, I now continue to receive the flashing amber light. For troubleshooting, I tested the internet connection direct to my Laptop and it worked fine, so I know the internet modem isnt the problem. I then plugged the internet into the Time Machine ethernet port and the green light began to work. I can also access the internet by airport through the TC with this connection.
My question is, why is the Time Machine able to detect the internet through the Ethernet Port, but not through the WAP port?
Also, by using this setup going forward, am I be putting myself at risk of any damage to my TC device, or exposing my personal data to the internet?
thanks for any and all suggestions.
Regards,
Elise

Is the TIme Capsule in Router mode or Bridge mode.. ??
It makes all the difference in the world.
How old is this TC?
It might be worth just doing a reset and set it up again.. make sure you use bridge not router if the modem already is running router function, otherwise TC will pop up an error due to the double NAT.

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