This is a known Vista issue. Microsoft is aware of it and even has an article in their knowledge base (http://support.microsoft.com/kb/947041
) explaining why it happens. Guess what? No solution available. I am in IT at my job, and we deal with the Local Only issue on a daily basis. This can affect any type of internet connection (LAN, wifi, dial-up, aircards). It basically involves Vista getting confused at which network adapter has a connection when it does a DNS probe on the adapters. We have a work-around that seems to be effective a small percentage of the time. This error also goes hand-in-hand with "Limited Connectivity", and you may see the status go back and forth from Local Only to Limited Connectivity.
To attempt the work-around, access your Network & Sharing Center (thru control panel or right-click on the network icon that displays Local Only [or Local and Internet] by the clock), select "Manage Network Connections" on the left side of the window, find the Network Adapter that is responsible for your connection, right-click and select properties. In the Networking tab, uncheck "Internet Protocol V6 (TCP/IPv6)" (NOT
the IPv4!!) and the two that start with "Link Layer Topology".
Next, you need to disable all network adapters except for the one you are going to use. Access the device manager (through Control Panel in Classic View), expand the Network Adapters category, and right-click and select "Disable" on all adapters except for the one responsible for your internet connection (in your case, the wifi adapter which should include perhaps the verbiage "802.11").
As I mentioned, this seems to work a small percentage of the time so don't get your hopes up.
Edited by benahad, 24 December 2008 - 08:19 PM.