I think that between here and other forums that I posted this question, I have heard the same both side of the argument.
1. Router only control inbound traffic so does XP Firewall, you need a third party Firewall like Zone Alarm to control the outbound traffic.
2. Router is already stopping the inbound attacks, so be worried of a virus that could come via email or via a third party .exe installed by me. A software firewall couldn't stop it, so what I really need is an antivirus and a spyware/addware protection.
I'm tempted to go with the less annoying of the two solution, I think that avoiding having a third party firewall with the annoying popups, security alert, oncoming updates and using my systems resources seems like a ideals choice for me.
So I just posted this new post