I just bought that same router; also from FS. My g/f's iPod Touch (1st gen if that matters) works fine with it right out of the box.
Only thing I did was I have my network "secured" by using MAC address filtering.
I also did not run the setup CD that came with the router. Not sure if any of that info helps you, but my guess is there is something up with that router- maybe want to exchange it?
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