Dear AMS and WeatherCat home networking gurus,
I wish I could offer you better advice than I can, but this is a can of worms in my opinion and I don't know if anybody has done something to fix it. Here is the problem as best I understand it and please if someone else knows better correct me.
To have any presence on the Internet you need a public IP address. That is what your DSL modem is giving you. However, like most people, you have more than one device. Unless you are paying extra, you get
1 IP address from your ISP. So if you are like our household, 1 IP address is serving dozens of devices - how is this possible?
It is done using a technology that used to be called IP masquerade and is now more commonly called NAT (Network Address Translation.) Your household is treated as an Intranet, a private network completely cut off from the outside world. Then a device (in your case your DSL Router) encodes packets from your various devices as if they were coming from that 1 IP address that your house has assigned from your ISP. It keeps track of the packets so that it can then reassign the packets on your Intranet when the replies come back. It works much like the post office. The public IP address works a lot like a zip code. Until mail arrives at your local town, it doesn't matter which street it should be delivered to. Once it arrives at your local post office (your DSL router) then it handles the reading of the street numbers to that your mailbox (say your Mac or iPhone) gets the right packet.
Okay, what does this have to do with your problem. Your DSL router is acting like a post office. If you simply connect the Apple Time Capsule on the back of the DSL router, it is like connecting a post office behind another post office. There is no reason why it cannot work, but it certainly isn't the most efficient. In addition, you need to be careful. Intranets are assigned blocks of the Internet IP address space (IPv4 address.) Most of these devices use addresses like 192.168.0.0 or 192.168.1.0 spaces. If your DSL router and the Apple Time Capsule use the same default Intranet, the packets won't be routed properly (think about it as having two post offices with the same zipcode - won't work.)
I'm very old school. I'm using a Mac Mini as an active firewall and it has UNIX software running on it that emulates what your DSL router is doing. I also have a WiFi access point, but I've turned off (with some pain and misery) its NAT (IP masquerade) capability. So at our house, we have a single Intranet. The Mac Mini is our access point to the wide Internet and it assigns the IP addresses to everything from my Mac to our TiVo. Even a device on WiFi must then move on the ethernet network to the Mac Mini to get assigned an IP address and have it's traffic placed on the wider Internet.
Now the problem you describe must be much more common. I would hope that it is now possible to get two devices that can be a router (i.e. do NAT/IP masquerade) to work with each other without problems. However, I haven't bought one so I don't know that.
Can somebody who has a more modern network explain how to do this?
Sorry for the long winded explanation.
Cheers, Edouard