Sorry my earlier fix was so short lived.
Whilst I have never had a bad one it is possible that your wireless card is defective.
Does it still fail if the MacBook is kept plugged into the mains. Some of ours go on the blink when the batteries are no longer up to full specification.
Is an Ethernet cable connection reliable?
You could try flushing your DNS cache: http://etherealmind.com/flush-dns-cache-on-mac-os-x/
You could also try changing your MacBook's DNS server to 126.96.36.199 - will not affect use of local network but ensures good DNS service for Internet testing.
Even when plugged in to the mains, internet connection is only possible when directly next to the router.
The ethernet cable provides a reliable connection. I'm writing this message via that method.
I flushed the DNS cache an changed the DNS server, but still no luck...I really have no idea what the problems is, my computer is able to connect to the internet at other locations (school, work, etc.)..
You could try changing channels again.
I did this Google search:
It contains a few useful pages including:
Might also try iStumbler to see how many networks are around...
I wonder if somebody else has a Router with the same name as yours in that area? Is it the default name it came with?