I've successfully been using Internet Sharing on a MacBook Air to share a wired connection via WiFi to local devices. As of yesterday this stopped working, which may or may not be related to the recent 10.7.4 update (there are forum posts here regarding problems, but they report connection drops, not this altogether more bizarre behaviour).
Now when enabling Internet Sharing via WiFi the wired connection, promptly stops working. Some digging later and it appears the routing is messed up:
netstat -r [clipped] Before: Destination Gateway Flags Refs Use Netif Expire default 192.168.188.254 UGSc 11 2 en1 127 localhost UCS 0 0 lo0 localhost localhost UH 1 6 lo0 After: Destination Gateway Flags Refs Use Netif Expire default link#5 UCS 4 0 en0 10.0.2/24 link#5 UCS 1 0 en0
As you can see, after activation the WiFi connection is being used as the default route which is clearly nonsense.
Performing a route flush resets it correctly to 192.168.188.254, however the initial behaviour must be specified somewhere. Any ideas on how to correct this?
UPDATE: It turns out this has been reported previously on 10.7.2 in this forum post, however with no solution there either.