Sure you can do that!
I assume that you have the necessary networking kit? Some cards and a bit of cable... In which case you _just_ need to install the cards, make sure support for them is in your kernel, give them IP addresses (please use private address space, 192.168.x.x, 10.x.x.x or [and theres another but I can't remember it]). Then you will be able to get from one machine to another.
You will need to play about a little with your security if you want to telnet and FTP as root, this will (should) be disabled by default. To share your internet connection you will need to enable IP Masquerading (A.K.A. NAT [Network Address Translation]). This is a lot easier than it sounds.
Have a look at the following for how to do it all. It will need a little time if its for first attempt but its a great learning experience.
Good luck!! The above may be available on your system under /usr/doc/Linux-HOWTOs/ ...