I work in 2nd Line Broadband support so I can tell you how things sohuld be set up.
In an ideal world, you should have your router plugged into the main BT socket in the house. Sometimes this isnt feasibile though.
You should have an ADSL microfilter as the FIRST thing in any used socket, with the phone (or phone extension) in one side, and the DSL in the other. The only exception (i can think of) is if your phone AND your router are miles away from the socket, in which case you can have your extension cable as your first item in the socket, with the filter at the end, as long as you dont have any other devices in between.
I usually recommend this website: http://www.kitz.co.uk/adsl/splitter_install.htm to customers having install problems, as Kitz is very knowledgable about Broadband.