In my old house, I had a linux server/router to give the rest of the house 'net access. It worked brilliantly, had a stateful firewall, 1GB cache, 20GB general file server, and more bells and whistles than you could shake a stick at. It even ran Folding@home when not being used to its full potential.

However, when I set up my network in the new house (also left the linux server there), I used a simple integrated router-switch with NAT, DHCP, Firewall, and a few other things. Why?

• My linux server cost about AU$300 in hardware, and took many many many many hours to set up completely - I followed a very nice magazine guide, but it still took a few attempts and a long time.
• My router-switch cost me AU$99 and worked out of the box.
• If there are problems with the router-switch, a power-cycle will fix it, and if it doesn't, a hard reset puts it back to factory settings.
• If there are problems with the linux server, and a "shutdown -r" doesn't fix it, I'm quite stumped. I had a problem with it initially, and after I realised that it had 0 hd space left, I had to completely rebuild it because I didn't know any other way.
• The router-switch uses very little power, so the bills are slightly less than an ATX system.
• The interface is much nicer than Webmin's, and I never have to ssh into the box to change some settings.

Even before I had the linux server, I set up the "main" PC to connect directly to the 'net through the USB port, and put a *proxy* program on it to allow the other computers connected via LAN access. It never worked properly, even though I tried many different utilities. It also meant that I had to have the entire computer running just to use the 'net on another computer.

I'm very impressed with my router. (Can't remember the exact brand though, but it's NOT a Dlink or a Netgear <shudders>)

Now, for security....
Broadly speaking, two firewalls > one firewall.
I would turn the router firewall on, and have software firewalls running on each of your PCs.

You are limited for your modern system in how tight you can make its firewall, as a lot of internet games need particular ports open, and certain conditions satisfied to run correctly.

For the older system, go to town! Lock down everything except services you specifically need, like HTTP, and keep Ad-aware and such up-to-date and running.