A 169.x.x.x would indicate that DHCP is not working. 169.x.x.x is an address that Win XP assigns itself if it can not get an address from a DHCP server. I am a noob myself so I do not know too much about the custom firmware. Possible in hybrid mode the DHCP functions are given to the other access point which is not running DHCP? Or maybe the other AP is running DHCP and you have conflicting address ranges, like you said if every thing is default, this is very possible. Maybe you should attempt to set different LAN IP address range.
tokyoturnip