Having just bought my Xbox 360 for doing some XNA development (and a little Halo3/COD4 on the side…), I wanted to get it online as soon as possible. However, with my current setup and the setup I’ll be having in my apartment in July, I can’t really promise myself that I’m going to have the ability to lay down some cat5 to keep the thing online. In fact, I’d prefer that I didn’t have to.
So with a bit of research, I was able to find out how to stick it to Microsoft, and avoid using their overpriced $100 wireless adapter for the Xbox 360.
It’s pretty simple, all you need is an extra wireless router or wireless access point lying around. If you don’t have one lying around, you can get a cheap Linksys WRT54G at Newegg for $40. In my case, I had a spare Netgear WG602(v3) that no one was using.
Be sure to reset the router to factory settings so that you can access it through the default web setup with the given username/password combination associated with the router. Once you’ve done this, upgrading your router’s firmware might be the only thing you need to do. Grab the most recent firmware from the manufacturer’s website and upload the firmware while connected to the router (don’t do it over wireless – the risk of bricking the router is much higher).
Once this is done, look through your settings for a AP Client or Wireless Client option in the router’s settings. Hook the router up with all the proper information so it could connect to the wireless just as it was a new computer going on the network. (Note: You’ll need to add the router to the ‘allow’ list if you’re doing MAC Address filtering – I wasted about 30 minutes until I figured why my router wasn’t connecting.) Once you’ve done that, I would suggest giving the router/AP a static IP on the network, in case you ever need to access the web control panel in the future.
After this is setup, simply unplug the router from your computer, and set it aside your Xbox 360, plugging the Xbox into one of the main LAN ports on the router. After it boots up, your Xbox should connect to Live without any issues. 
If you weren’t lucky enough to have a router that supports the Client mode out of its firmware, consider installing DDWRT or OpenWRT – two open source solutions to turning your router into a powerful router with much more features than a standard consumer router could offer. You can find a tutorial on how to do Client Mode with DDWRT and OpenWRT.
Or you could shell out the $100.
