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what does it say is wrong??
many dongles (so you know) are painful and dont normally like working with xbox as the drivers have to be built into the dongle...i beleive xbox.com has a list of supported products
Live goes down randomly everyday now after christmas. You can check the status of Xbox live on www.xbox.com. They usually will post a report when they are having problems. I guess all the new Xbox owners after christmas are clogging up the Live system and it can't handle everyone. Very aggrevating. They need to get their servers upgraded... fast. Nothing like paying monthly for something and not being able to use it because a ton of other people are using the free one month trial that comes with the system.
It should hook up but Xbox live is having a ton of issues basically xboxlive is down and wont be back up for a while. you can go to www.xboxlive.com and search under status then go to support this will let you know when you can connect back up to xbox live.
If you problem isnt with xboxlive then you will need to get a wireless router. Then go through the steps to set up a wireless network and then set your xbox to that wireless network.