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For the record, when you connect to WiFi, the device tries to fetch a URL from Kobo's server. If this fails, it will give message about this. With older firmware, the device would not let you continue using WiFi if thi happened. With recent firmware, it should be displaying the message that @steveparry posted, "It looks like the network you've joined has no internet connection. Would you like to continue?" If you agree to continue, the WiFi will be enabled, and you should be able to use it.
If the problem is the Kobo servers being down, as it was in this case, if you choose the continue option, you won't be able to setup a new device, or sync to the servers. Those are the primary purposes that Kobo intends for the WiFi. I think this is only the second time that I have seen the servers used for this down.
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