Pugs, I set my SB2 once with my wireless network, to a Apple Mini....then, all of the sudden, it stopped working and gave me the same error message you had.
I called Slimdevices and they walked me through it....it was a Firewall issue...they gave me some settings and it worked right away. You will need to check some sharing and firewall settings that might have been changed unknowingly....and this might be more the case if you have a XP based system. Now that I use Apple OSX, I know what the updates that come up affect which programs, but the frequent updates that Microsoft releases have the tendency of making a once stable PC, into something unusable or make other things not work, such as the Squeezebox.
If you cannot figure it out, call Slimdevices, they are good at trouble shooting.
Question for all SB owners, why doesn't the Squeezeplayer recognize a Apple Lossless Encoded track? I am wondering.