I have built a local network. From my experience, here are some brief answers:
1) I find UNIX-clones (Linux, Solaris) and their text based manipulations (commands and log files) more suited for administration. If you have a SUN workstation go for Solaris, it is more secure and stable. Otherwise, go for Linux.
2) Any linux distribution is full of tools like DNS server, firewall, e.t.c. Also you may want to check ip-masq (search in google)
3) I am using equipment from D-link. Eventhough it is not considered the top in reliability they are cheap and for me, they are working perfectly.