When you switch to Internet mode, the controller takes the network info you provided and tries to authenticate/connect to your wifi router. The bluespray hotspot is gone as the controller switches to client mode to join your wifi network. If your info is correct, it would successfully connect to your router and my.bluespray.net will take you to the controller's IP address. If for some reason it fails to connect to your router, it will keep trying. When my.bluespray.net says that controller not found, it means that the controller cannot connect to your router. The reasons can be one of (most popular first):
1. the wifi signal at the controller is weak or sporadic. Consider moving it closer to the router or use a wifi range extender.
2. The info you provided is incorrect - try again.
3. Your router might have some rules (MAC filtering?) that prevents the controller from connecting.