1. Yes I would say that your machine is sufficient enough for Linux. It should be fast enough for a www domain. So far everything looks compatible, might want to check out your internal modem though. If it is a winmodem, might be hard to install. Yes, Linux machines are fully upgradeable. As far as I know, most 3com cards are Linux friendly and I do believe if your talking about he Linksys cable/dsl router, you should be able to get that working too....but it would be a tricky task to get it to work thru a router like that one mentioned, since the router makes it so all your computers behind it have a 192.168.x.x IP address.
2. I prefer RedHat, but highly suggest Mandrake if you totally new to Linux. Once you know what you want, then you might want to change distro's to like Debian, or SuSE, or anyone of the other distro's out there.
3. Linux comes already where you can have or setup a firewall. But you might want to look at others just to see what you might need or to suit your needs.
Well, hope this helps in any way.....any other tips or tricks...always read the HowTo's at http://www.linuxdoc.org