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Routers do not have to be "installed" on any computers. You administer the router through its Web interface. You browse to its IP address and log in with a wired computer.
If all computers have XP with SP2 or SP3 or Vista, my recommended encryption is WPA-PSK using the AES algorithm. If older operating systems are involved, you may have to use 128 bit WEP instead.
As a TEST, you can turn encryption OFF and see if all computers can connect.
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