The network engineer in me thinks that 169.254 should never be used so that it's obvious when they crop up that something is wrong. But then there's at least one example of paid work that I've done which uses them for the wireless access points VLAN. Such a cowboy.
There's nothing deliberately unconventional - it really was just get the NAS connected enough to shunt files around and make space on the main machine and I'll set things up properly later, then it's always just been oh it's working good enough for now.
Yeah, as I said somewhere above, the 169.254.X.X range is the automatic private IP addressing, usually only used by default when a client machine can't connect anywhere and gives itself an address.
I can imagine PB using it for his network address though. :C
Making sure everything's on the same subnet should be the first thing to check, unless PB's got a huge amount of hosts or some weird routing somewhere, it should only need a /24 range, looking at the ipconfig, he's got a /16 on the windows box.
I've actually done what you're doing years ago and I was able to use a more conventional network setup.
Probably easier using static IPs.
I had a small access point in client mode attached to the network via a cable and then wireless to the phone. This meant whenever the tethering was enabled the network got Internet access. Meant only a single wifi connection to the phone to get everything online.
APIPA uses a /16 mask by default, so that's no biggy. If you can ping and ssh, then you know the connectivity is there, so it's either something in the PCs network adapter, or the NAS itself. Perhaps try deleting the NIC from the PC and then adding it again after a reboot. That might (might!) set it up with the default settings.
Aye, it's usable o' course, just unusual to see it - it always makes me think that the host has lost connectivity, but if PB's NAS is on the same range then all's ok.