Hmm, well an interface can't act both as a client and a server. Basically, if you are using your wireless connection to receive internet, then you can only share via the netbook's LAN port.
Windows (all consumer versions) is very weak in routing and networking, per personal experience. I have extensively searched for software which could perform advanced networking functions, and have only found one. You may have a bit of trouble with it. It's called NAT32. Try to run that on your netbook.
Alternatively, if you run OpenWRT / DD-WRT on your router, you could change its WiFi connection to Client Mode and connect via its WiFi and receive internet straight on your router, then:
1) Connect both Desktop and netbook via Ethernet
2) Connect Desktop to Ethernet, and activate Internet Connection Sharing / use NAT32 on the Desktop so that you can get internet on your netbook
3) Connect Netbook to ethernet, and attach a wireless adapter to your Desktop, and use a tool like Virtual Router, or follow this:
http://www.indiabroadband.net/broadband-how/28800-create-your-laptop-wifi-hotspot-share-lan-wired-internet.html
Hope those suggestions help.
EDIT: The problem is that Windows lacks tools that share internet connection via LAN, while tools that share internet connection via WiFi are abundant.