I prefer a dedicated box for my firewall. I have tested many of the linux-based solutions and have settled on a turn-key setup from
Astaro (which is free for home use up to 10 IPs and three NICs).
It's a pretty sweet install, boot off the CD, it wipes the drive and auto-patitions it. You can get up and running with a iptables-based firewall very quickly.
Minimum recommended hardware:
400 MHz CPU, 128 MB RAM, 8 GB IDE or SCSI HDD, Bootable CD-ROM Drive
Pretty good community support, too.