Switch vs Router

I am looking at wiring my house up and need to know if routers are worth
the extra money (I would like a 5+ port of whatever I get). My
understanding is:
1. Switches are better/faster than routers becasue they deal only with
MAC addresses.
2. Routers come in handy mostly for security reasons thanks to NAT.

My questions:
1. How hard is it to share an internet connection over a switch vs a Router?
2. In terms of security could I not just have one computer that act as a
server (with firewall) to the other computers through a switch, without
have a terrible security problems?

(I hope the formatting does not get too badily screwed up...)
                                  Other Computers
    (or would it be router?)     /Other Computers
Internet----Server-------Switch-Other Computers
            (firewaled)          \Other Computers
                                  Other Computers
3. For a the above setup could I use a windows machine with a usb (hey 
are cheap, but I do not think that there are any with linux drivers) 
802.11b or would I have to spring for a wireless brigdes (ditching the 
windows machine of probaly)?

(I hope the formatting does not get too badily screwed up...)
Would a setup like this be ok?

I do not mind RTFM, just give me a place to start.