WiFi won't work on iPhone 3GS

Hi all,
I used to be able to connect my iPhone 3GS via WiFi to my Powerbook G4 without issue. Now, since the latest iPhone software update, I'm able to connect, but the phone reverts to the 3G network. It still indicates that I'm connected to WiFi (when looking at the WiFi setting panel) but the little WiFi icon doesn't appear - it says 3G.
I've tried resetting, reconnecting, restarting, refreshing, the iphone, but to no avail. I can't download any large files / purchases from app store unless I physically connect to itunes on my computer. No bueno. Any advice?

I frequently use a Computer-to-Computer network in order to link my iPhone 3Gs to my MBpro to use the Keynote Remote App when there is NO WIFI...this method is used to still allow iPhone to control Keynote with no wifi connection...
When I create that Comp-to-Comp network and then go into settings on iPhone to select that Comp-to-Comp it ALWAYS stays as 3G icon and not WIFI icon...
Even if I am in fact connected to my home WIFI...I tested this and created a Comp-to-Comp and as soon as I selected it and moved away from my home WIFI the icon immediately changed to 3G and yet it still controls my Keynote so I know the connection is complete...
In the previous cases you used this did that icon ever change to the WIFI???
Maybe a really obvious question...but why wouldn't you just connect the iPhone directly to the WIFI network and download the larger apps??? Why are you uisng the WIFI through a Mac laptop??
Lastly if you connect the iPhone to the Mac and allow the sync in iTunes...you can download and then update or install the new apps in iTunes while connected...

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