Okay, progress!
No cordless phones, its mixed b+g on the host router and I can't seem to change that, but the TPIK setting did the trick. I'm on an old mac so I used KisMac to troubleshoot.
Now the weird thing is that when I'm connected to the internet I see the repeater with a signal strength around 20, but when the connection is idle and ppoe on the host disconnects, the signal strength on the repeater drops to 0 - even if I'm standing right next to the repeater. Therefore it does not show up in my available wifi networks list, and manually connecting doesn't work either.
However if I walk over to the host router, try to access the internet, I'm taken to a page to start the ppoe connection automatically. Once started and I'm connected, I see the repeater still shows a zero signal strength. If I unplug and restart the repeater, then everything works fine, 70 signal strength standing right next to it, until the next time the connection idles on the host. Then its back to zero signal on the repeater.