dsl might not require a router or switch, it depends on what you want to do.
until a short time ago I was using exactly that type of setup. I had one machine connected to my ISP through the hub, and functioning as a very simple proxy (I used Proxyi, a freeware app from Analogx, my cat could configure it). Since 2K and XP by default allow an external and internal address on your net interface, I did not even need a second NIC in the proxy box.
There were limitations, though: I could browse the web and check my e-mail from the second PC, but I did have to do some extra configuration for FTP to work, and something like UDP was out of the question without a more sophisticated setup, or a router as others suggested. Also, it would not be considered ideal in terms of security.
Currently I do use a router, and it is a superior configuration, that I agree with completely. Now both machines are equally capable in ALL functions. I now have two PC's going into the hub, then the hub to the router's internal interface (NIC1), then the router's external interface (NIC2) going to the DSL modem (and the leg bone connected to the knee bone!).
If you have an older PC laying around, say a P90 with 32 MB of RAM, and 2 NICS, you can use
this. This software will configure a router for you, and it will not even require a hard drive or CD to be installed, the whole thing fits on a floppy.
If you have the money, though, it is true that a little hardware router from Linksys or D-Link or others is a great solution. They usually run about 100 dollars give or take (mainly *take* in the US, they are very cheap).
*bootsy* the second NIC in your main box is only necessary because it's a server on your internal LAN right? That part I'm not too sure about, but I'm interested in eventually having a setup like that myself. As an alternative, could I not use a hub combined with a router as I have now?
I love this stuff!