I am using a Dell C610 laptop running Ubuntu Server 8.10. I have configured wakeonlan and it works fine. It works fine unless the laptop lid is closed. I have tried multiple settings in the BIOS concerning power management but nothing seems to work.

I have installed the server version to practice running a server. I have been using Ubuntu for several years but this is the first time I have tried the server version.

The question.

Is this simply a problem with using a laptop in this configuration or is there some setting I am missing.

D11011101

There is a lid switch that gets triggered when the laptop is closed.. (path is representational and may be slightly different on your machine)
cat /proc/acpi/button/lid/LID/state

check /etc/acpi for a config and script for that switch, maybe whatever it is doing when you shut the lid, is blocking your WoL request
Beyond that I cant offer anything, but it may be a starting point for you.