Hi,
I had the same problems with my router.
I had to check each setting to configure my MacBook Pro, Dell Inspiron, IBM R61, iPhone 3G, Iphone 4, Xperia X8, HTC Incredible and Archos 10.1 [
pain in the neck]
Xperia X8 Specs as follows:
Wifi - 802.11g is prioritized over 802.11b [newer routers are 802.11n but are backward compatible - its will scans for 802.11b/g device hookups so dropped signals occur]
You have to set b/g compatibility mode [do not set to auto or n only mode]
Security - Open, Open WEP, Shared WEP & WPA Personal [new routers have compatibility to Open, Open WEP, Shared WEP & WPA Personal, WPA2 Personal, WEP2, WEPplus and Dynamic WEP - do not set to WPA2 Personal/WEP2/WEPplus/Dynamic WEP or your Xperia X8 will not be able to "see & hookup" to your wifi router]
Encryption - TKIP and AES [TKIP is a 128-bit per-packet key - 128-bit = WEP protocol not WEP2]
Channel: any channel between 1-10 [newer routers have up to 16 channels and change channels when they reset or when the router is set on auto and scan for interference (newer routers have channel set on auto)
Just an update regarding router channels: 18 March 2011
You can use Wifi Analyzer to check which channels overlap and therefore are causing interference to your wifi connection. For example if channel 6 is the most common in your area then there will be a lot of overlaps. You may want to change a less "busy" channel.
Check it out:
Wifi Analyzer v2.5.6 <-- here
<install><launch> check your channel, overlaps & interference
<change> your router channel to one that has less interference (overlaps).
cheers!