Wireless network setup

I have 2 PCs running XP Pro, a DSL connection, and I connect one of the PC's to my ISP through an Actiontec GT-701wg. I want to share my DSL connection, and SOME files to the other computer. Also, a notebook and another desktop may be added into the fray sometime in the next 8 months or so. I know how to set up a network but I am sort of confused on this exact setup. My "modem" (the Actiontec) is actually a Modem AND router in one. It has one ethernet port, and it is also a wireless gateway. So, here is my question:
Can I set up my network hardware like this
and get internet access to both machins, as well as file and printer sharing? My printer is a Lexmark Z25 USB printer. And, If I can get file sharing this way, how can I make sure, I mean be positive, that without good cracking/hacking knowledge, PC2 won't see all of my files?

 

I have a Microsoft MN-730 Wireless PCI card, and it claims to be WPA compatibile, yet when I set my router to WPA it wont connect. XP says the network is there, but just tries to "validate" my connection and then says that I dont have a certificate. What do I need to do to figure this out? I can connect just fine without any encryption. For now though, I have reverted to my ethernet connection to avoid any intruders.

 

Aku - you say you are running XP-pro but need to know the OS of the other machine to give you specifics on setting up tight security on your network.

 

Both are XP Pro, but right now I am just focused on getting this dang network working at all...

 

OK. I got it all figured out and I'm using WPA. MODSELETE THIS THREAD. Or I guess we can just let it die...whatever