It sounds like you've gotten your network settings screwed up somewhere, but it's pretty much impossible to diagnose from this distance. I very much doubt it's the Mac, and software update appears to be working fine here.
To diagnose network problems, the thing to do is to start from scratch and go through your network methodically. Disconnect everything from the network but your primary machine (which I assume is the Mac), and - using a cabled ethernet connection - see if everything works. If it doesn't, then set up your router from scratch given the settings from your ISP. Next job is to add your wireless connection. Again, see if everything on the Mac works. If it doesn't, you've found your problem - maybe you've blocked a port you shouldn't have, or have set up too many levels of NAT (i.e. both your router and your WAP have NAT turned on - if so, set the wireless to bridged mode, turning off port forwarding and DHCP), or maybe you simply don't have your firewall or DNS set up correctly. From there on in, just add one extra item at a time and check that everything is okay before moving on. The thing is to take your time, and try not to change multiple things at once.
Sorry I can't be more specific, but without knowing EXACTLY how you have everything set up, I really can't guess at what the problem is.