WMC/XBox360 connectivity issue

[IRJ8]

WMC works flawlessly on my desktop (Windows 7) and plays back recorded TV shows fine.
Xbox360 boots fine and signs on and when I instruct it to contact WMC it does so successfully..plays the intro music and moves to the blue screen background which should have the WMC icons overlaid, but then this stays blank. Shortly thereafter it looses contact with WMC and asks if the desktop is connected to my wired network and offers me a reboot. If I reboot the process repeats again and again.

When I test the network on the Xbox is tests fine and it says it sees and can contact the internet and the desktop on my network and WMC.
When I test WMC on the desktop it knows I have an Xbox extender, but has problems connecting. When I try to reinstall Xbox as an extender I get as far as the screen which needs the numeric codes which of course it says will be displayed on my TV screen. But of course the TV screen will only show the blue stylized background and nothing else and especially no numeric codes.

As far as I can see there is nothing at all wrong with my network and the XBox360 seems fine so the problem appears to be either W 7 or WMC on the desktop. But everything I have tried thus far has not solved the problem. I even tried changing audio stuff etc. and did not sign on to Xbox Live, but none of these helped.
Suggestions please.. After several years of good use I have no idea why this problem has arisen.

Oh I also went back 3 days using the "restore" facility on the desktop and reloaded the last 13 Windows and Essentials updates but this did not make any difference.