Oh yeah, pfSense baby!
Dont buy Wifi miniPCi cards at netgate.com, they are expensive, buy at http://www.roc-noc.com/wistron/minipci/radio/CM9.html or http://www.mini-box.com/miniPCI-and-mPCi-Express-cards_2
A great review of the ALIX from netgate http://xercestech.com/alix-single-board-computer.geek
Install on VirtublBox using pfSense-2.0-RELEASE-i386.iso in custom install mode took only a few minutes.
Just bought this http://store.netgate.com/ALIX2D2-Kit-Red-Unassembled-P1028C82.aspx
See all here http://store.netgate.com/Desktop-Kits-C82.aspx
Install pfsense on the 2gb compact flash card for the Netgate ALIX2D2 Motherboard http://store.netgate.com/ALIX2D2-Kit-Red-Unassembled-P1028C82.aspx
Installation Documentation for the ALIX boards
NOTE: I am doing this installation from a Ubuntu Server 10.04 computer
Yes, how depends on whether you're talking about an authoritative DNS server to host DNS for your domains (in which case, use the dns-server package), or whether you just want something to use as the DNS server on your internal hosts. In the latter case, the built in caching DNS forwarder is great for that.