this is not nessisarilly a linux question, but im sure someone can answer it.

first some background... i have a linksys wireless router, and with 4 machines that need to connect to it. 3 wirelessly and 1 hard wired. for some reason, one of the XP machines cannot access the routers DHCP server if i have a WEP key enabled, so what i did was just enabled the mac filter so only the 4 machines can connect to it. now, my question is how secure is it? i am pretty sure nobody can get access to our connection, but can someone view our packets with a program like kismet or ethereal? thanks

Regardless of whether you enable WEP encryption or not packets on a wireless networks can be sniffed. It is less secure without the WEP encryption obviously, but it depends where you are situated. If you're using this at home then having an encryption key is desirable but probably not altogether necessary, if this is a business network then my advice would be to use WPA encryption if available and find out why the XP machine isn't working and get it working. Bare in mind though that MAC and IP addresses can be spoofed, more easily than you might think.

If the only issue is not being able to get a dynamically assigned IP address from the router then you could consider giving that machine a static IP and see if that works. Also, I personally would limit the IP pool the router uses.