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I need some help wrapping my brain around this. Here's what I want to do:
In my office room of the house is my DSL connection. I currently have my DSL modem wired into a Linksys Wireless N (WRT160N) router to do my PPPoE connection. I'm not using the wireless for anything right now - it's disabled.
In my basement I have my TV and Xbox360. I don't have the wireless attachment for the 360 as it's pretty expensive. My goal is to bring internet connectivity to the Xbox.
Would buying a 2nd Linksys WRT160N work? I would then configure it as an access point, and use a wired ethernet connection into the Xbox.
Thanks!

What I'm understanding is that you just want to go from the Ethernet port on your Xbox to a WiFi adaptor that can connect to your WRT160N. To the Xbox, it would be just an Ethernet connection and the WRT160N in your home office would just see a node on it's wireless network. First point, the Ethernet to WiFi on the Xbox would not be an access point. The WRT160N in your office would be configured as the access point (where the Xbox "accesses" the Internet). Second point, before buying anything try to find out if you can get a decent signal connection between your office and the basement. Set up the WRT160N as an access point and get somebody with a WiFi adaptor (like maybe a friend with a notebook)to see what kind of connection is possible. You may find it easier and cheaper to just run an Ethernet cable from your office to the basement and plug the Xbox directly to the existing WRT160N (that would probably work more reliably as well and avoid a bunch of network security issues).
As far as using another WRT160N as this "Ethernet to wireless" connection to the Xbox, well study the manual and the configuration utility on the WRT160N that you have. See if it can be configured to use the wireless connection as the WAN, that is, to connect to the Internet through the wireless port. If so, then yes, just use a second WRT160N in the basement set up to receive Internet through it's wireless connection. The WRT160N in the office would be the "ISP" or gateway for the WRT160N in the basement. Note: this means that you have two seperate networks in your home, the one on the WRT160N in the office and the one on the WRT160N in the basement. For example: 192.168.0.0 would be the network number of the office lan and 192.168.1.0 would be the network number of the basement lan.
I am currently doing this exact thing, but for different a purpose. I found a low cost solution in a Edimax Wireless Broadband Router which can be configured to connect to the Internet through the wireless. But, it is only a G/B capable router, not N. Your WRT160N would be backwards capable to connect to such a router using the G protocol, but this router would not be able to connect to the WRT160N using the N protocol. You would have to research if that is an issue for what you want.

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