I have the Linksys WRT54G, and I upgraded the firmware, no change. (just some background, I work for a telecommunications company as an ADSL WAN/LAN configuration analyst)
My PC is using my old Xbox wireless game adaptor (since I never bother to buy a USB or wirelss NIC card) So I might be hard wiring the PC to the router to eliminate the wireless portion from teh equation.
Second,,, DO NOT set your PC as DMZ on your router, this will open all Router ports/ firewall to your PC exposing it to the net (defeats the whole purpose have having the router to protect your PC)
Instead you should be setting your Xbox 360 (IP, use a static IP) as DMZ, this will expose the 360 to the net and allow all ports open, this will assist with lag
If you don't beleive me, we the 360 behind the router and do a network test from the 360 dash, you will see "NAT" come back as (fogoet report, but it won't be open) Then set your 360 as DMZ on the router and do the same test, "NAT" will be open which will allow better performance (but this won't affect the media connect part of the issue, I am looking at that, since it appears all of the poeple having problems are syuing the Limksys router)