Degrading wireless signal over time - Netgear WGR614 v6

I have a Netgear WGR614v6 wireless b/g router. Connected to the router via ethernet I have an HP desktop (WinXP), and a command line linux box (ubuntu 6.06) set up as a web server. The router is on a shelf about 2 feet above the HP. I also have a Macbook (running OS X.5.2) in my bedroom/studio, connected via wireless (50% signal strength right now). My connection is 3mbps cable.
In the past I have gotten very stable and fast connection speeds with the Macbook and have not had many problems. When I ran a speedtest from the Macbook a few months ago, I got a result above 2.2mbps.
Over the past few months I've noticed a gradual decrease in both wireless speed and stability. When I ran a speedtest recently from the Macbook I got 500-700kbps. File download speeds have slowed to around 60KB/s for bittorrent, http, and ftp. The connection also cuts out occasionally. I did notice that switching to WPA from WEP seemed to make the wireless connection slightly more stable.
At first I thought it might just be a distance problem, even though the same setup had not caused trouble in the past, so I plugged a wireless adapter into the HP desktop next to the router, and unplugged its ethernet. I had been getting a speedtest result of 3mbps over ethernet. Now, on wireless, with 100% signal, I was getting 600-800kbps, and webpage loading times had slowed enormously.
Also, I've noticed just this last few weeks that when I am downloading something over wireless with my Macbook (even though the download speed is only 70KB/s), the wired connection on the HP slows to a crawl, basically making it almost unusable.
Any help in sorting this out would be greatly appreciated.

Just wanted to post some more info in case it helps figure this out. I brought my MacBook down right next to the router, just to see what would happen. Surprise, surprise, I was not getting a nice clean, fast connection like I had expected. Instead, I'm getting 84% signal strength 3 feet from the antenna, and I am getting only 487kbps on speedtest, when the site finally loaded.

router firmware version V2.0.19_1.0.19NA (latest version)
Factory settings. I've tried channel 1, 6 and 11, but no difference. And my phones are all 5.8ghz

As I stated before, it has not always been this bad (reference, a screenshot taken from the exact same location on Jan 6 2008, when I was getting 2522kbps download and 226 upload for the same 3000kbps connection that I am now getting around 600kbps download and 140kbps upload on wirelessly. my internet on Flickr - Photo Sharing!) As far as I can tell, there have been no major changes to anything around the house since then that could have an effect on wireless connection.

I also tried hooking up a dell desktop in my room via a wireless card, and although it connects, the connection is frequently interrupted.

I have been getting frequent time outs on larger pages and files

There seems to be a slight burst of speed right at the start of downloading something (100KB/s as opposed to less than 60KB/s) then it quickly decreases and/or times out.
I've noticed that simple pages with very few images load correctly much more often than complex pages with lots of images, which tend to take a much longer time proportionally, and which often time out/hang.