3rd level of masquerade

Hello!

I have a problem with setting up a 3rd level masquerade. According to my
knowlegde everything should be working fine already. Networks I'm
connected to, seem to look like this:

Internet <--> Net A <--> Net B <--> Net C.

"A" is beyond my administration. "B" is a small network inside my flat;
it's connected to "B" through a D-Link DI-604 router. Now I'd like to
set up a virtual network, inside my computer. This is "C". I'm using VDE
2.0 + TUN/TAP, running on my Ubuntu Breezy. To simulate another
computer, I'm running Qemu with another Breezy installation.

Everything seems to work (at least all those things that should work in
this case), as long as I keep masquerading OFF on my PC. Without
masquerading (but with ip_forward set to '1' and empty iptables rules)
the virtual PC is able to ping any machine, in any network mentioned
above (even the Internet). When sending a ping request to hosts in
network "A" or the Internet, I'm getting messages like 'Redirect
Host(New nexthop: ...)'. On the virtual installation I'm setting a
default gateway with the command:
route add default gw 192.168.3.1
(this is my own, "real" PC, which connects together networks 192.168.0
and 192.168.3).

I'm turning on masquerading using following command:
iptables -t nat -A POSTROUTING -o eth0 -j MASQUERADE
I've also tried some other combinations, but none of them made any
difference. The result is that I can reach any machine in network "B"
(192.168.0). Packets seem to be translated correclty, everything looks
promising. Unfortunately every attempt to reach some farther host ends
without success. The lamp on the D-Link router signals a data transfer,
so I think packets are leaving my computer. Pings don't come back,
there's no other way to connect to a distant machine. I though that
maybe gateway in network "A" throws away packets with TTL less than some
value, but making TTL greater didn't help either.

I don't have any fancy configuration on my PC. There are only 3 network
interfaces: lo, eth0 and tap0.

I'm out of ideas