Why do you mean by "no route set" on device 169.254.1.1?
Do you mean you are enable to set a default gateway to 169.254.1.254? Because you need to in order for this device to know that to get to the internet, packets must go to 169.254.1.254.
What you are experiencing is a network with Windows machines and no DHCP available. When a machine boots up and DHCP is unavailable, it automatically addresses itself in the 169.254.0.0/16 subnet.
You need to create a DHCP server on that LAN and change the IP address on the router's LAN interface.
If it's a small LAN, go with a class C address such as 192.168.1.0/24. On the router LAN interface, assign 192.168.1.254/24 and create a DHCP scope for that subnet. Make sure the default gateway on that scope is set to 192.168.1.254.
Change the NAT pool on the router and then you should be able to connect to the internet, it's that simple.
We are pleased to announce availability of Beta software for 16.6.3.
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