What is happenning is that you have a good signal from your access point to the device. However there are too many collisions/errors on that frequency coming from the access points in the area. This is what causes the disconnect.

You should go through the frequencies/channels until you find one that is better.

To find the channels your neighbours are on you would need scanner software. I think I saw one on maemo 2006 apps catalogue for the 770.

Check there.