In order for ActiveStink to work for me via Wi-Fi, I have to set all my connections to "Work." Within the Work profile on the Proxy Settings tab, is a checkbox that says "This network connects to the Internet." Checking that box allows me to get on the 'net through my router and still use ActiveSync.
Yes, the blinking green LED is normal. It blinks orange when you are not associated with a wireless network and blinks green when you have a connection. Personally, I would prefer that it not blink, but nobody asked me. At least it's not a big bright LED like the 3800/3900 series had.

I find those to be incredibly distracting.
Oh, and you're not stupid.

Just about everyone has had some problem with Connection Manager at some point.
--
Dave