DHCP Server
DHCP Configurations
There are three different DHCP configurations Dynamic, Automatic, and Manual. Dynamic has each host getting a new IP address when they connect to the server, Automatic give a host the same IP address every time they connect, and Manual gives the host an IP address assigned by the administrator based on their MAC address when they connect. With most servers you'll be able to combine two or all three of these configurations to create the network that best fits your need.
Benefits of Dynamic Allocation
Dynamic's big advantage is that it is the simplist to configure, if not configured by default. You don't have to worry as much about running out of addresses, since when a person logs off their address goes right back into the usable pool of addresses.
Benefits of Automatic Allocation
With Automatic Allocation users are able to get a static IP address, without having an administrator manually enter every users MAC address. If hosts are going to host their own servers then this method could easily accommodate them.
Benefits of Manual Allocation
Security is Manual Allocations strong point. The Administrator has complete say over who gets to get into the network, without having to go to a host computer to set an IP address manually. It's also possible to set up much better firewalls if you want to filter traffic to or from specific computers. This would work all right in a home network, but it can't scale up very well.
Benefit of No DHCP
Not using DHCP adds slightly more security, since the host has to be given and configure his IP address manually.
Use Old PC or a Router?
This decision is dependant on what you have, and what you need. If you have a modern router then it will be simpler to just use the router. If you only have a switch or hub, but have an unused computer, or a computer with Linux, Windows NT or windows 2000 already installed then it will be more economical to use that as your DHCP server.
Most home internet connections only give you one IP address, so if you want multiple devices connected to the internet you're going to need to have a device run NAT. The device running NAT has to be between the other devices and your internet connection. So you have a few options, have a personal router do everything, use a Linux computer with two NICs connected to the internet and a switch or hub (or hosting a wireless ad hoc network). If your old computer only has one NIC and you don't have a router, then you need make a decision. NICs are slightly cheaper, but routers are easier to configure.
DHCP servers in a network
DHCP servers can be placed anywhere within a broadcast domain (odds are your whole homenetwork is in just one.) Comptures that do not have a static IP configured will broadcast a request for an IP address once they are connected to a network or try to use a network service, which the DHCP server should recieve no matter where it is in the network.
Configuring basic DHCP on any network device shouldn't take much time at all, if any. But if you want to configure static IP's for each MAC address then you will either find it impossible (many personal routers), or it to be tricky.