Well... Here is how I solved the same issue in my home network. I used internet connection sharing for a while, and found it to be unreliable. I constantly needed to reboot, and forwarding ports was next to impossible in 98SE
I asked arround and found a friend that had an old P133 in his garage, and he was glad for me to haul it off for him. I then stacked in as much ram as possible, and installed clarkconnect. There are many "micro" distros out there for setting up linux routers, but I felt this one met my needs the best. I tried freesco, but found that clarkconnect easier to learn. Go to
www.clarkconnect.org and take a look at what they have to offer, but dont just rely on what I say. It is possible that there is better distro's out there for your needs. The best bet might be to search in google for "linux firewall" and take a look at whats out there. You can get just about any bootable computer that you can fit two network cards in to run as a linux router. The big thing to me was trying to find the quietest computer possible.
In all honesty, I was introduced to linux because of the router project, and I loved the routers stability so much, that I converted two of the three computers in my house over to linux. (My son insists on running windows because of his games)