I feel your pain.. Well did.
We was on 8mb with BT and had the same problem.
If my housemate was watching something on ITV Player, as he did every night, it would slow the whole connection down and i would lag like hell in online games.
There was no fault on the line or with the BB. Speedtests showed 6000+ kbps. But as soon as iplayer or Netflix or YT etc was used all the bandwidth went bye bye
And with 4 people here it was.. interesting to say the least!
But we got lucky. TalkTalk unbundlled our exchange (Pontybodkin) and now we are on 24mb ADSL2 and now someone can download, stream, use the web and i can still play online with no lag at all. A VAST improvement.
I hope you get something sorted out for you and your village.
TalkTalk 24Mb 24575/1019
Other ISP's used over the years: AOL Supanet Pipex Tiscali Eclipse Zen