It should work without a router. Unless the DSL service uses PPPoE - which I believe ATT services still use in some areas (for instance, old Ameritech territories). What DSL provider is your friend using? If it requires PPPoE, your friend may need to get a router or upgrade.
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You may also want to tell your friend to move on from Win98SE, but that's another story

. If you are technically inclined, perhaps you could help them select a decent computer from Craigslist.org or your local University or State or other gov/edu organization may have a surplus program. Many <$200 bargains to be had at all these places. Otherwise even Dell has <$500 laptop specials, but money may be tight.
If you get a used machine you could perhaps add some RAM (also super cheap on Craigslist, but use a memtest cd to test it) and put on Ubuntu (the live cd has a memtest program option during bootup) or Xubuntu (if it is older, say <1GHz) and boom, fresh, nice new machine that is not completely outdated and waiting to get owned with the screensaver virus of the month. Ubuntu and Xubuntu are good fits for the web/email only types, especially if you walk through their daily usage pattern with them and show them how to work Firefox, Evolution/Thunderbird and MP3s, as well as setup videoLAN, flash and Java.
If you are not so technically inclined, perhaps someone else you know is.
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