Is your gateway correctly configured? What do you see it you do
in a terminal?
Destination Gateway Genmask Flags MSS Window irtt Iface
169.254.255.0 * 255.255.255.0 U 0 0 0 eth0
169.254.0.0 * 255.255.0.0 U 0 0 0 eth0
default 169.254.255.100 0.0.0.0 UG 0 0 0 eth0
If you do not have a line with a UG in the "Flags" column, your gateway isn't correctly configured. You said you can ping your router, right? That means your local setup is most likely ok, you just need to setup the gateway.
To do that, at least in Redhat Linux FC3, edit
and make sure it looks something like this:
Where, of course, the GATEWAY adres is the local address of your router which is connected to your local ethernet.
Hope this helps...