Managed to solve this (eventually) by replacing the router, I bought TP Link WR841N and placed it a bit closer to the camera. Like the "N" in the name suggests, it is a WiFi-N router (the previous one was B/G), so it has a better signal range and is more resistant to signal interference. Did the trick for me, since the signal has to pass 2 walls to reach the camera, everything's been working glitch-free for over 2 months.
To answer your questions:
- while I was having connection problems, power-cycling the camera made it reconnect to the router, but I had to do it every 2-3 hours.
- I tried both, static IPs and DHCP, didn't make any difference.
Hope this helped you in any way...