1. It's best to do so and only takes 5 mins with BB.
2. You ought to have a firewall on all machines connected to the 'net. Your desktop machine is unprotected from any internet problems regardless of wireless setup, even a basic old firewall like Kerio 2.15 would be better than nothing click here . Definitely install a decent firewall on the laptop.
3. Could be problematic - the free version of ZoneAlarm doesn't support Internet Connection Sharing as far as I know, the last time I tried it with Kerio 4.2x ICS was disabled after 30 days, and I have no idea if the aforementioned 2.15 supports it at all. You'd be much better off with a wireless router, however you'd be limited to WEP encryption by your `98 machine. It's better than nothing, but not as good as WPA-PSK which your laptop will be capable of.
5. No, but with a wireless router yes.