Wireless router drops the connection during hight traffic (eg.download)

Have you tried another router?  I had the same problem with mine, replaced it, and the problem went away.

I kept insisting that the router was fine, since it worked for everything else.

You could also make sure that you have the most current drivers for the wireless card in the computer.

I had exactly the same problems on a router I had and it was due to MTU  settings, I still get this even on top of the range routers. so when it comes to downloading large files i would allways recommend cabling it.

Lots of forums suggest firmware upgrades but if your downloading movies I have had a variety of routers and allways come across this issue

Unfortunately cabling is not an option due to recent apartment refurbishment that did not count cabling in.
I tried another router (WRT54G) with a stable DD-WRT firmware but faced the same results.

I have a suspicion on MTU settings and will do some testing to see it's effect in the case. Will revert back.

nope, seems ok to me. I recreated working environment in the office and all worked well. The only thing I did not do is the shares software that my client use with his ISP and it is called DCC+ or something - some third party GUI FTP with multiple options on bandwidth control and etc.

If it works ok wired and not wireless, it still could be errors causing retries.  DCC+ probably uses multiple connections and that could be multiple retries accumulating.  There is something on the DCC website about limiting the 'slots' you're using.  Also, if your client tries to make too many connections he may be using up the usually limited number of simultaneous connections available thru the wireless router.  Also mentioned on another site is background programs like AIM and Messenger can use up all of your connections.  This is especially true if they can't get thru at first and keep on trying until all your bandwidth is used up.  Anyway. all of those things are accentuated by large downloads.

Although I understand what you are saying, my client won't be able to consume that amount of technical info. All he sees is the download starts and then decreases till the point the wireless connection is lost. Other company proposed some sort of solution using the d-link wireless router they sell as a part deal with their ISP services. I suspected sabotage from their side but tend to be neutral in the matter. As I said before - in my testing environment using a regular share folder and copy-paste all worked fine without loosing signal and accomplishing download of 700+ Megabytes without problems.

Seems like there is nothing more can be done here at the moment. Thank you for info.

Assumption-based solutions proposals with no direct cause determination.