Q: iMac Loses IP Address and can't connect to the internet

iMac 20-inch, Early 2008

2.66 GHz Intel Core 2 Duo

4 GB 800 MHz DDR2 SDRAM

OS X 10.9.5 Mavericks

Since the last 3 days, my iMac keeps losing internet access - WiFi looks 'on' with full signal, but after a few minutes, despite the full signal, I'm actually offline. Under Network Preferences it says "WiFi does not have an IP address and cannot connect to the internet".

I have a much newer MacBook Air and I've tested it in the same room as the iMac and it works perfectly fine.

I've had problems with this iMac's WiFi since moving into this house last year, and I thought it was the configuration of the house (the router is at the opposite end of the house, but it's a small single storey bungalow....not the White House). And also, the problem was different in the fact that the WiFi signal was dropping off.

I've looked up other threads on this issue but the main difference is that I've disabled 'sleep' mode on my iMac - it's been disabled for years as I had another problem (it would crash after 'waking up'. Someone on these boards said just disable that option).

I upgraded to Mavericks about 3 weeks ago and saw no major difference (having heard about all the various wifi related problems with this version of OS, I was worried).

This problem has been occurring for the last 3 days now and I really don't know what to do. I've tried 'deleting' the wifi network and creating a new one, renewing lease, but I'm running out of ideas.

I've plugged in an ethernet cable and although at first it didn't seem to find that connection either, after a reboot it did, and it's so much faster than it ever was on wifi. However, it's not a practical solution as I have a use a 20m long cable across the house.

What do I do?
Should I revert to Mountain Lion from my Time Machine backup? It's just that I'm not even sure that it's due to Mavericks, as it was working ok until a couple of days ago.

Any help would be very welcome (ideally 'for dummies'!)

Screenshots attached.

Sorry for writing War & Peace!