T100 server with Windows server 2008. No IP address from DHCP server

Trying to set up new T100 server with server 2008 on a network that serves a whole building and provides internet connection. Two computers running Windows XP have no problems in getting an IP address from the DHCP server.  And the first time I connected this server to the network it also got an IP address.  But now it connects to the network but not to the internet. ipconfig shows an IP address in the 169 range that windows assigns when it doesn't connect to a DHCP server.

We tried a static IP address and were able to connect to the internet using it.

All the computers go via a PowerConnect 2808 Web-Managed Switch, 8 GbE Ports switch.  I did by-pass the switch - it didn't help.  I have also connected the server to the internet via another network without problems.

Windows suggests a problem with the DHCP server - but the mystery remains Why is there no problem with the PCs running Windows XP?

Oh, I did try turning off Windows firewall - it didn't help.

So I am looking for more ideas about what to try next.

What happens when the DHCP server has allocated all the addresses that it has available?

ChristopherMR