I am working on a dedicated server that is on a shared T1 Line. I can use 100% of the line for most of the day but I need to limit the incoming/outgoing bandwidth on it between the hour sof 7pm and 12pm.

How diffictul is this and what is the best way to go about doing it?

cbq (class based queuing) might be a good tool for this. it is designed to sort traffic based on classes like IP, possibly DNS, etc.

most linux distros support this without tweaking. just place the cbq-init file in /etc/rc.d/ and place the configuration files in /etc/sysconfig/cbq

http://sourceforge.net/projects/cbqinit/

As far as I know CBQ is a somewhat older system which is replaced by HTB (Hierachical Token Bucket) Here's a TLDP HOWTO associated with HTB. This Linux Advanced Routing & Traffic Control HOWTO also contains some information. Watch for "HTB Tools" also. This is how far I got in a advanced traffic shaping/ bandwidth management topic. But there may be simpler solutions for your situation. You might want to have a look at HTB.init and CBQ.init (upon your choice) too.

However there are user-mode bandwidth management tools. They allow you to manage your own bandwidth in the perspective of a user. This wouldn't be sufficient if you want to use the solution for the use of the server in administration perspective. For user-mode tools try googling

would SQUID work for this? Ive read several other posts recommending Squid for bandwidth limiting. Can squid limit bandwidth during certain times of the day?

Squid can be configured to deploy restrictions based on day/time parameters (nothing directly related to bandwidth). Squid has some bandwidth handling facility (if compiled with it). Once I stumbled upon this artice on delay pools of Squid. This is another I found named Reining in Bandwidth With Squid Proxying. But using Squid for total bandwidth management is not goog enough I think. As far as I got, I believe Squid solution would only provide management of it's own (HTTP) traffic only. I'll post some other links wich might be useful to you.

MasterShaper is a traffic shaping software. Here's a link to a Linux traffic shaping article. Although not relevent to your task directly, if you have time have a look at WonderShaper also.