Can you give me a screenshot of what you see?
Also do you see a spinner for a bit and then the cannot connect to internet popup?
Are you able to see anything in Exchange?
There does not seem to be any hour glass type of waiting. When I installed AI I also had to manually activate it because it would not connect to the internet. I also have photoshop version 3 and 5 (but I removed 5 yesterday but that didn't help) on my computer. I tried disabling firewall but that didn't help. I can see no internet related information in the exchange panel.
Are you still seeing this issue? If yes, could you provide the following log file: