<< So they hook a modem up to their wall and the modem to the router along with all the other computers to the router..does this sound right? >>
Exactly right for many ISPs, except AOL (and a few others)!
Since AOL uses a proprietary login sequence, the PPP client built-in to SOHO routers cannot negotiate a connection.
If your relatives don't want to switch from AOL completely (I have some clients who prefer AOL's interface), then you could...
* Sign your relatives up with another ISP (Earthlink, ATT, or a good local provider)
* Set the router up to dial this ISP for basic Internet access.
* Have your relatives switch their AOL account to a BYOC (Bring Your Own Connection) account, which is only $9.95 a month.
* Change their AOL connection settings to use TCP/IP, which will then go through the router and the other ISP, yet still allow them to have full access to AOL's proprietary content (if they wish).
UPDATE:
Was curious about this thread the more I thought about it, and it looks like your cheapest option (no extra hardware required) may be to set it up as follows:
* WinME machine to act as ICS "server" (it runs the ICS service). This one connected to phone line and hub/switch. You want to use WinME for the ICS and AOL bindings, since 98 flavors have limits on number of adapters bound to TCP/IP (per M$ KB).
* Set Win98 machines to act as ICS clients. They connect to hub/switch, and are configured to use DHCP addressing.
* Make sure the Win98 machines are also set use "LAN" for Internet connections, and that their AOL configs are set to connect using "TCP/IP."