I have enabled internet sharing with ethernet. I try to share the internet with "automatic DHCP" to my Buffalo. I can access the buffalo but I am unable to share the internet from mac to buffalo and from buffalo to other machines. How can I do that?
Short answer: you're doing it wrong.
The Buffalo device you've got is a wifi router. Normally this kind of thing sits between your cable modem (or whatever you've got connected to the wall) and the rest of your home network, and redistributes your Internet connection to multiple devices in your home.
If you turn on "internet sharing" on your Mac, you're essentially turning your mac into a wifi router as well. There is no reason to do this. And you're probably creating a "double-NATing" situation as well, which is undesirable. I'm not sure how you've got your network wired up physically, but that could be part of the problem too, I imagine.
So, in short, either get rid of the Buffalo entirely and rely on your Mac's internet sharing to do the same thing, or use the Buffalo to distribute your Internet connection and turn off Internet sharing on your Mac. I would do the latter. So your setup should look like this:
This is the case both on a physical level and on a logical level—the Buffalo sits "upstream" of your computers in terms of networks traffic, whether it connects to them over an Ethernet cable or wifi.