OK, some background info:
A hub, as previously stated, simply splits the ethernet connections into more trunks. Hubs are dirt cheap because they don’t really do anything in essence. Hubs are not ideal for networks because they don’t do any packet routing. For example, let’s say you have 3 computers on a network, all connected via a hub. If you are on computer 1 and send a packet to the network, the hub merely replicates that packet to every port, so regardless of whether you are trying to access computer 2, computer 3 will recieve a duplicate of the packet. This translates to lots of packet collision in a busy network.
A switch on the other hand only sends packets to their proper destination, so to use the same 3 computer example, sending a packet from comp1 to comp2 will not result in comp3 getting any packets.
Lastly, a router is like a switch, only it has the ability to bridge multiple network segments, and route traffic across those network segments.
As far as I know, there are no wireless hubs or switches, only routers, although, I haven’t looked too hard.
So, to get back to the OP’s questions…
having no DSL connection will not prevent you from using a wireless router in your home to beat the tar out of your wife in half life. In many ways, it makes your life a lot easier because you don’t have to worry about connecting to your ISP, assigning IPs, DNSes, etc. Simply plug in the router, use Internet Explorer or something like that to set up how many dynamic IPs you want your router to provide to your network, set up the security features and you are good to go.
A router might be more muscle than you actjually need, but they are cheap enough that it shouldn’t be a problem, and it will give you greater flexibility in case you ever decide to get a cable or DSL line. One thing to consider however…
For deathmatching (or playing any games over your network) you probably want to go with an 802.11g setup because those games will use the extra throughput. This option is a bit more expensive than the 802.11b setup, but not so much that it will break the bank. You can set up 3 computers on a 802.11g connection for under $200 easily, compared to $80ish for a 802.11b connection. (You can actually get an 802.11b for even less if you shop around and don’t mind rebates. I managed to get a router and 2 wireless adapters for a grand total of $35 after rebates.)
I have no experience with the adapters providing peer to peer capabilities, so I can’t comment on that.