Disconnected from Xbox LIVE When I Play a Game

Have a peek at this link and answer as many of the questions as you can at the bottom of the page, it will help to give as much information as you can to the people that are trying to help you.

forums.xbox.com/.../9.aspx

•  What Country/State/Province do you live in? - United States, Georgia
  
• Modem brand & model number:  - Touchstone Telephony Modem, Arris TM502g
  
• Router brand & model number:  - Valet M10
  
• Network Connection Type: Wireless/Wired - Wireless
  
• If Wireless, what type of encryption are you using? - Locked 
  
• Things you have tried: - Resetting the router and modem 
  
• Is UPnP Enabled? Yes/no/Unknown - Yes

• Is NAT Type Open? - Yes

• Any Error Codes you encounter:  -
  
• What type of internet do you have? - Cable/DSL/T1/3G? - Cable
  
• Who is your ISP(Internet Service Provider)? - Comcast
  

Hey mate, having the router closer to the Xbox certainly wouldn't hurt. If you run a LIVE connection test, what appears? I'm interested in 'More info,' too, if it's available.

I got the USB extension cord today, and can now connect no problem, but now playing a game online seems nearly impossible due to the lag I'm getting.  I've rarely had lag before, but now can't play a game without it.  Any ideas on how to fix this?

Have you tried removing the extension again, to see if that resolves the lag issue? Also, it wouldn't hurt to run a speedtest on your PC. Please post the results here.

If I remove the extension cord, I'm not able to connect to LIVE, but I could always try again.  And where do I need to go to run a speedtest?

You can run a speed test at http://speedtest.net. There have been some issues with the LIVE network today, and as such, you may have a more productive session trying to troubleshoot your connection later today or tomorrow.