Routers will definately be the safest bet. They have built in firewalls in their firmware. The setback to that is that it is very complicated setting up the "rules" to let the router know who or what to let in and out. For example, I have a router, and though it is suposedly possible, I can't for the life of me figure out how to connect to a game of Age of Empires (any of the 3, including AoM). Also, I find that I cannot host any type of direct IP connecting games (suposedly I can, but all the things I try in my router's setup seem to not work). As for bandwidth, routers are set up to maintain full bandwidth to each machine. Now, obviously if you are using cable (sharing bandwidth between ALL users, i.e. all subscribers to your ISP), you will not get 100% of the bandwidth you would get if only one machine was on-line. This is true for cable whether you are using a router or not.
As for the "direct link" method, I think as long as the host or gateway PC has a good firewall on it and it set up properly, you should be fairly safe from the outside. If your gateway PC is not connected to the modem via USB, then most likely you will have to connect to the modem via CAT-5, thus using your NIC card. If that is that case, you will need to put another NIC card in your host PC. As long as you have a free PCI slot, it's no big deal, they only run about $20.
Your other options include a switch or a hub. Hubs are the "old and busteds" of networking in my view. They, unlike routers, split the bandwidth between how ever many machines are hooked up to them. Switches, on the other hand, maitian bandwidth like a router, but do not have built in firewalls. Switches, from what I can tell, are mostly for bigger networks, used in conjunction with routers. (Basically, it seems to me that a router is a switch with a built in firewall.)
That's what I've put together about networking in the past couple years that I've had to build my own network. I am by no means an expert on any of this. I have just gathered these little bits of info along my journey. Though I think most of what I said is true, I may be wrong about any part of it, so get another opinion before you actually spend your hard earned money on anything lol. Check out the
Linksys Network Educator and the
Linksys FAQs. Linksys is one of the top brands in networking hardware, and they have a ton of usefull information on setting up a network. My router is a Linksys BEFSR41, and though it has small problems with the setup (that I blame myself for due to the lack of really trying to solve them), really is a nice router. They even have a nice little network wizard that will help you decide on what you need. A couple of other brands I hear are pretty good are D-Link and Netgear. Hope some of this helped. Happy networking!