I saw this on microsoft's website
Steps to work around the problem
When a Point-to-Point over Ethernet (PPPoE) connection is created in Windows XP, Windows XP creates both a local connection and a broadband connection. Because Windows XP creates the two connections by design, and because the Automatic Private Internet Protocol Addressing (APIPA) address is expected, Windows XP should not indicate that the local connection has limited connectivity. Sometimes, you may receive the "Limited or no connectivity" message even when the computer is currently connected to the Internet. In this case, you can safely ignore this message. If you want to disable the message, follow these steps: 1. Click Start, click Run, type ncpa.cpl, and then click OK.
2. Double-click Local Area Connection, and then click Properties.
3. On the General tab, click to clear the Notify me when this connection has limited or no connectivity check box, click OK, and then click Close.
http://support.microsoft.com/kb/892896