So what were you doing wrong?

Turned off the internet? Oh you're THE guy with the switch that turns the internet on and off!! :D

I swear internet has nothing to do with networking your Xbox.
You seem to be confusing internet, ethernet, and networks but glad to hear you stuck with it even if you're not sure how it was fixed. ;)

just had ti set a static ip for my network on the pcs side...and by mircle it connected, playing crazy taxi 3 off it and already watched the resident evil movie using xbox media player, now all i need is a dvd writer :)

Get your hands on the Sony DRU-500A or DRU-500AX if your luck enough to find one.

already got a pioneer dvr-a05 on its way

Well thats not really a miracle. More like I suspected - IP address error.
Seems the DRU500 is always the one everybody talks about but I got an A05 cheaper and haven't had any problems.