mcpo1234, your situation is easy to fix. Just turn off the DHCP and NAT features from your modem (i.e. using "bridge" mode) and let your Time Capsule be the DHCP and NAT server.
That is the "major surgery" that I was referring to in the previous post. At least it is "major" for most users. Pretty basic stuff for IT guys, but pretty intimidating to a user who is expecting plug and play.
mcpo1234 seems to not want to do this, if I read his response correctly.
Let's wait to see what he reports.