Thread moved from Newbie Security to General Chit Chat as this is more networking than a security issue:

Two wireless routers in the same house, one mac one linky, I've been against it all along
Generally shouldn't be a problem unless they are sharing out the same DHCP address scheme. How exactly is it setup? (e.g., Internet ---> router ---> router ---> Lan?)

the router would take a rest and assign us all an addy like 169.172.blah blah
Given that you haven't indicated what your desktop OS is but you've indicated you've wanted to install SP1, I'm going to assume this is a Windows machine. When Windows cannot get an IP address, it will use the 169.172.x.x default. I believe MacOS does this as well.

Lack of knowledge. 3 months ago my dad stressed not to install SP1 but I did because everyone on some forums said it was good, ended up giving me various services that should not have came up, mostly NT exploits I'm assuming..?
Any services that may have inadvertantly started can be permanently stopped. Look through the Microsoft Security Section and Security Tutorials.