Ethernet shield problems! Time to update library?

Just because the lights flicker on the shield doesn't mean you have your configuration correct. This only shows that there's activity on the ethernet link. If you can ping the Ethernet Shield from your computer and get a response, then that indicates your settings are probably at least partially correct.

And the server portion of the code uses the client code when connections are established. So the improvements to the client do affect the server side as well.