Im really dissapointed at the hardware and service provided by bt. First they send the HH3 which does not work fully and when I call them up to ask for a solution, I say I know what the problem is so can you send me a new modem so I can get a new router.
The only thing he said he could do was put me through to the paid for help line
Just stumbled upon this problem myself.
I've found I can get it to work if you explicitly specify a 'User Defined IP Address', rather than selecting the machine name from the list.
I know this doesn't work for some people, but I thought I'd add my 2p
My firmware is Version 126.96.36.199.188.8.131.52.3 (Type A)
I've had the very same problem with my BT home hub 3 as well, after extensively scouring the web ive found the easiest way to get past the problem is the assign the xbox to DMZ (will find this under port forwarding) hope this helps guys