Option B is to ask them to install a 2nd phone line in to your main house.
Once it's installed just run a phone extension to the new house and plug all the routers etc. in.
Seemple.
Thats basically what we have doen though

I can run cat5 thats no problem and the new house is flood wired, but i need wireless as we have 4 laptops and 3 pcs/macs to go into the new house so i need full wireless coverage.
Just found this on ebuyer, so might get one and give it a try
http://www.ebuyer.com/product/79363Might not have been clear before.
It sounds like you're happy having 2 separate lines because that's what you asked BT for.
So scrap the new line going to your extension and ask them to install a 2nd line to the adjoining house with broadband.
When they've installed it get a bit of phone cable and run it from the new socket at the adjoining house across to your extension and stick a phone socket on the end of it.
Take the BT router out of the adjoining house socket and plug it in to the extension socket.
It doesn't matter what BT say it will work.
The reason they say it won't is probably because your extension has it's own address and it's not on their database.
They are also slightly retarded.
If you want a repeater you need a switch instead of a router. It's basically a thick version of a router that splits the signal. Just wire it in cat 5e from a port of your router to the input of the switch. Shouldn't need any configuration apart from the wireless security set up.
How did you get on with the VAT thing? Any joy?