Hi koopa
I'm having the exact same troubles as you, but I'm using a USR router with a twist
Many moons ago when I bought my wireless router (it doesn't have an ADSL modem built-in btw) the USR firmware was extremely unstable. Some clever people figured out that the chipset used to drive the router was identical to that of the Dlink 624+ wireless router, and that you could load this firmware onto the USR router using a special method. I did this and the router has been stable ever since doing that.
However, it won't allow my Xbox to connect to it. I've got 3 PC's in my house, and two PSP's. They all connect to the router without any trouble. All the PC's have different wireless network cards (a 3com, a USR and a Belkin) and the PSP's are only 802.11b rated (so the wireless router has to be in mixed-mode for them to connect). The Xbox 360 wireless adapter is rated for 802.11a, b and g so my router supports all the modes but 802.11a. I don't know whether this is the factor that's causing me issues, but it shouldn't be because in theory the adapter should find a compatible mode and use that. My Xbox can see the SSID, and knows that there's WEP enabled (64-bit) but no matter how many times I enter, check, and recheck the key, it just won't connect to the router. It fails every time. I've tried the adapter in a different slot on the 360, nothing. I've plugged the adapter in, shutdown the console, turned it back on, and still nothing. No matter what I do, it simply will not connect to the router.
I don't have any filtering on the router at all (MAC, IP, etc), the firewall is disabled, and as mentioned I'm using WEP 64-bit (I've also disabled WEP entirely and tried to connect using no security at all, and it didn't work). I've tried setting up the wireless connection on the Xbox manually, by entering the SSID manually and selecting WEP 64-bit, entering the key, and it still fails.
Do you know if your router supports the 802.11a standard? Also, does your 3com have that new-fangled 125 Mbps upgrade that only Dlink, USR and 3com seem to offer? That might be another factor in why the adapter won't connect. My Belkin card in my server at home will only ever connect at 54 Mbps, despite it being rated at 108 Mbps and the driver being the correct updated driver.
These are the only things that I can think of that can be causing these problems. It seems rather strange that 3 PC's and two PSP's can connect to the router, but the Xbox can't. I just get the red light and it never changes, no matter where I plug-in the adapter.
I have managed to configure a wireless to wired bridge on my PC at home using the onboard network card, and the Xbox 360 connects to Live! perfectly, so I will most likely be taking the wireless adapter back to where I bought it from this weekend.