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If you do not have a router that you can plug directly into the back of the Xbox 360 then yes you will need to purchase a wireless router to sync up with your wireless router that you already have downstairs. You didn't specify if your broadband router had wireless capabilities? Does it? If not then you will need to buy a wireless router to be able to hook up your Xbox 360.
Microsoft has their own personal wireless router that fits on the back of the Xbox 360 nicely. I would recommend you purchase it due to ease of installation and compatability.
if ur xbox has the wireless adapter it doest need to be plugged in. if you dont have that adapter, you must either buy it and connect wirelessly or purchase a cable long enough to reach the router downstairs
you need to set static ip's for the xbox 360 and the lan that is on the pc, easy to bride the two connections on your computer, then set static on the lan that the 360 is plugged in to, example:
360's static settings:
when your in the dashboard on your 360 go to the right all the way to the system slide. click netowrk settings then click the ip address box be sure this is set to automatic, and be suree that the DNS box is on automatic as well. if this doesnt work then your cables may be hooked up wrong or some other issue.