XBox 360 not compatible with Motorola WR850G

Motorola WR850G router may fail to connect to xbox live after update to firmware 6.1.4. I was able to correct the problem. My solution was
Go in xbox >> network config >> IP and use Static option. Set the xbox to an IP in the range allowed by your router configuration. The router IP config range is found in the router config web >> Lan section. Then I set my router config >> Routing >> DMZ IP Address setting to the xbox ip I just assigned to my xbox. Restart router using the restart button on the Basic page of router config. Restart your xbox and attempt to login to xbox live. This solved my problem.

As a side note, on the xbox networking test page, the xbox live status message will allows show they are aware of a problem with xbox live login. This is a lie. For that reason I postponed trying to fix my router problem thinking it was an xbox issue, it is not. Once you finally connect to xbox live you will still notice this incorrect message remains. Microsoft developers ****...

I am surprised that you are having this problem. I own the WR850G and I have no problems connecting to xbox live. I have my router connecting to the dsl modem using pppoe. And the router is set to allow any other devices connecting to the router to use dhcp. Note that I have my xbox 360 using dmz from the router's settings. Even though I had it at one time not using dmz, it was still going on xbox live. Maybe you need to update the firmware in your router. I know mine has the most up to date firmware released.