You said you set a static Ip address but did you set the DNS or leave it at auto? Did you try to set the DNS static and see if you can connect, it should be the IP of your router. See if you can connect to the internet then. Programs such as limewire often expose your systems to trojans which a lot of the anti spyware programs will not detect or anti virus. I would look for a possible trojan using a trojanhunter program. In START> RUN> type CMD at the prompt type IPCONFIG /ALL do you see the DNS there? Again it should be your router address.
I have 5-6 pcs on a work group, my two are on a switch to the router. My XP-Pro machine is running DHCP and today it came up with a bizzar IP address wrong subnet and no DNS. Just for jollies I set it up static and my network conection worked but still no DNS or internet. No spyware or viruses but my daughter used it on limewire to download a few songs last night so I assume I've been hacked...
How can I tell and what is the fix for the IP problem.
BTW: It's a blank machine so no info/email is at risk..