The simple answer is money or lack of :( . It would be simple to just go and buy a usb WIFI dongle. In fact Expansys have two really cool USB 802.11b dongles. But of late I have spent a fortune on computer kit and think its about time to slow down!
Expansys are located really close to where I live [NR. Manchster UK] and I always find that they have really cutting edge stuff, and things which are difficult to pick up elsewhere at resonable prices.
Anyway, if the Apollo astronauts had said you gotta be kidding, we can't make a air filter out of a pair of trousers then they would have died for their defeatist attitude. I guess that the routing through the IPAQ is possible, just looking for the sticky-tape to make it possible.
Any clues or suggestions then I would be most thankful.
Step one would be to get rid of the 3970 bluetooth software and load the Widcomm bluetooth software BTW-CE Version 1.3.1 Build 46. Search this board hard and you can find how to do that.
This Software has a hidden feature that can be turn on, that appears to allow an iPAQ to act as a LAN Access Point for a bluetooth phone. Search the 545X part of Brighthand for how to do this, it's in the bluetooth headset enabling thread.
This should get you started. But for 75 dollars you should be able to get an Orinoco USB 802.11b adapter. (It's a PCMCIA slot, and the OEM of the card you are using in your iPAQ) you will be a lot happier with this in the long run.