does imac need a router to have two computers share internet?

Internet sharing still works. However, recent iMacs no longer have a built-in phone modem. So if you still intend to use a dialup connection, you will need to get Apple's USB fax-modem.

http://store.apple.com/us/product/MA034Z/A?mco=NDc4ODE3Ng

If I were to purchase Time Capsule, would there be any point to her buying a internal router for her laptop?

I don't know what an "internal router" is...? The Time Capsule is basically an AirPort Extreme base station with a built-in hard drive for network storage, so it functions as a wireless and wired router.

A router is only useful for Internet access if you have some type of broadband access. It connects to your broadband access device (such as a DSL or cable modem from your ISP) and distributes that connection to two or more computers.

+Usually you have to purchase a cable/dsl router with these services.+

You have to have a modem for cable or broadband (which you can usually either purchase or rent). After that, you have three choices:
Your iMac will need to be hardwired to the modem with a cable (no wireless network), or

You can get a router and use the iMac (and the Dell) wirelessly. In that case, the router needs to be hardwired to the modem with a cable, or

You can get a router to use the Dell wirelessly, but still have the iMac hardwired to the router because that is a more reliable connection in case you like to download large files/videos. That is the setup I have (and I have a Netgear router which works great).

I do not have Time Capsule, so I can't answer that question.

Usually you have to purchase a cable/dsl router with these services.

I'm sure different ISP's may have different policies, but all my ISP gave me was a cable modem. Before that, when I use DSL with the phone company, I was given a DSL modem (again no router). I'm sure they would have been happy to rent me a router for $10 a month, but I was given the choice to use my own device.

So in my case, my AirPort Extreme base station connects by Ethernet cable to the ISP supplied cable modem. It acts as my wireless and wired router.

You can still use the +Internet Sharing+ as you did before, except you will now be sharing your Ethernet connection over AirPort. However, the purpose of a router is to distribute a single broadband connection to multiple computers, so she should be able to connect directly to the router without the need for you to use +Internet Sharing+ through your Mac.

No need for this if I got Time Capsule, right?

Hopefully, you can get the broadband service without using their router. The Time Capsule will then serve as your router. Your wife's computer can connect to the Time Capsule wirelessly, since is already seems to have wireless capability. You can connect your iMac to the Time Capsule either wirelessly or using an Ethernet cable.

Jonathan Kandell wrote:
I wasn't clear, sorry; we're switching to cable or broadband.

Usually you have to purchase a cable/dsl router with these services.

You usually get a modem of some kind. All modern cable/dsl modems ship with a router built in; usually they contain just one incoming data port (a co-ax port for the cable modems, a RJ-11 DSL port for the DSL modems) and just one outgoing data port (almost always a standard RJ-45 Ethernet port) so that you can connect your machine. Some have a switch built into the system, and have more than one Ethernet port, usually four or five. Some have a wireless hub built into the system. Some have both the switch and the hub.

I would recommend getting a stand-alone modem and a stand-alone router, so that if one device goes down you don't have to replace everything.

Would the Imac connect to these wirelessly without buying additional hardware?

Most iMacs since the G4 models ship with built-in wireless systems. If you get a router which has a wireless hub they will connect without a problem.

And if so, could Imy wife "share" my broadband with me, without additional hardware, by using just her wireless card and my "share internet"?

You don't need to share anything. You just need to get a router which has wireless. If you turn Internet Sharing on, you would be able to live without the router which has wireless, but you would have to keep your Mac on _and not let it sleep_ all the time so that it could share its connection. It would be simpler to just get a router which has a wireless hub built in.

ps. I misspoke when I said "internal router". The Dell upgrade has a router option but looking closer I see it's a Netgear wireless router. No need for this if I got Time Capsule, right?

Time Capsule has a router and wireless built in. It should work.