A disappearing phone radio indicates a hardware problem with the flash ROM on your device. I've seen at least one other person on here report that issue (he was on Sprint). I'd say take it to Verizon while the radio is showing None and get them to replace it.
As for your IP thing, why on earth are you using 169.254 on a routed network? I realize you should be able to, but if you've got a DHCP server in your router handing out addresses there's no need to use that range (which MS uses as "Automatic Private Addressing" for cases of peer-to-peer networks without a DHCP server.
What's your default gateway set to?
I agree that it "should" work, but if you can get it to work with a more "normal" private IP range (192.16
then just do it.