169.254.x.x is not the camera's default IP, its just taken that IP as it can't see your router to obtain a valid IP via DHCP
169. addresses are non valid IP addresses which are assigned when any device is trying to get an address via DHCP and fails. You can't use 169. addresses on a LAN.
Why on earth are you trying to change the router address ? Change the camera IP to a static address on your router's range - ie 192.168.0.10 or something !
Doh !
In fact I've just looked it up on the camera's website and in the installation guide for your camera it says the below. (pay attention to step 11 !)
1. Ensure that the camera is powered and connected to the Ethernet
network.
2. Start SConfigurator by double-clicking SConfigurator.exe on your
hard disk.
3. In the General tab, click Program Options.
4. Check Detect All Units on LAN.
5. Ensure that the VSIP Port is 5510; otherwise, click Default.
6. Ensure that the Discovery IP Address is 255.255.255.255;
otherwise, click Reset to Broadcast.
7. Click OK.
8. Select the Units tab, then click Discover. A device of type “Unknown”
with a 169.254.X.Y IP address appears in the Units box; it
corresponds to your new device.
9. Select the unknown device, then click Configure.
10. In the Reconfigure unit? confirmation window, click Yes.
11. If you have a DHCP server on your network, check Use DHCP.
Otherwise, enter the IP address, subnet mask, and gateway of the
device, as provided by your network administrator (
ie your router)
12. Click OK. The device reboots with its new network settings.
13. In the Units tab, click Discover to update the list of devices and see
the S2600e with its new settings. The S2600e initial configuration is
now complete. You can now adjust the image coming out of the
camera.
If you are not getting a valid IP from your router its either not connected properly or you need to determine whether DHCP is on or not.