Reading back this thread there appears to be numerous similarities between N770/OS2006 issues and N800/OS2007 issues that I am having. I did not see any resolution of issues seen on the 770/OS2006 (OS2005 appears to have had a fix) with:-
Numerous hotspots visible
Virtual memory enabled

Next time I encounter the 'link-local ip address' on my N800 I will try disable Virtual Memory (currently 128MB).