I am looking for a distro that I can use as a router for my home network and content filtering and I want to use that machine also to play my movies. There are lots of router/content filtering distros(IpCop,ClearOS..) but couldn't find a way to install XBMC to those distros. Because they are stripped down Linux serves and don't have gnome etc to install XBMC. Could you guide me? Thanks

It is usually considered bad practise to run X on a box at the coal face. So you get
1. Stripped down server boxes doing the work
2. Much more hack attack vulnerable desktop boxes for normal use.

If you really want to do both on one box, VMs beckon. I'm presuming this is a low load server, otherwise you shouldn't dream of it. But the proper way to do that is to have X inside a VM, which affects performance. There are known vulnerabilities in flash plugins, adobe stuff, downloaded content, etc. I had a script pump spam out of my gmail box because I landed on the wrong website, and gmail was open on another tab.

right. No X on routers.

OpenBSD is a sturdy OS when it comes to routing and packet filtering. I would suggest checking that out.

Also, it does sound like you are going to end up running a VM environment. As far as that goes, it would be helpful to consider your hardware when choosing your hypervisor. There are a handful: Xen, esxi, et al. Go with the one that will use the least overhead resources.

OpenBSD as a routing platform needs *very little* in the way of resources. I got away with 128M of ram. I think thats a bit overkill as well.

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My network is very small like max 10-20 computers. That is why I do not need much of power I guess. Let's say I installed Linux or Windows then into that I installed virtualbox plus clearos. How the ClearOS or IpCOP can be the router in this case? I am connecting with DSL modem PPOE connection and I have two network cards in the machine.