Although you have DHCP enabled on the ZyXel router do all the devices on that network use DHCP or are they set statically? If they were set manually then although the ZyXel offers the Draytek an IP address it may then be conflicting with the other manually set device as two devices on the same network with same IP.

Rather than use DHCP on the Draytek WAN2 try setting it manually.

From the draytek go to:

WAN -> Internet Access -> WAN2

Make sure it is set to enabled and then use the specify an IP address. Try something like 192.168.0.254 as the IP, 255.255.255.0 as Subnet Mask and 192.168.0.1 as the default gateway (which is the ZyXel Router). Also set DNS primary to 192.168.0.1 as well.

If possible it would then be sensible to set a reservation in the ZyXel router for the IP address used.

Only other thing that springs to mind is the CAT5 cable from ZyXel to Draytek WAN2. Is it a standard straight cable or could it be a cross over cable? Are all pins correctly connected? Do you have a cable tester or can you try another straight through cable?

Richard

LOOKS LIKE I WILL BE USING A CROSSOVER TO TEST MINE
i'm trying to disable dhcp on a 2wire bt router and use it as a failsover backup or to balance load .
somehow it doesnt want to show the show the wan2 as up but surprisingly it has bound the ip 192.168.1.254 to the mac address successfully .
any suggestions ?