home lan setup suggestions

I'm a total noob at networking but I somehow managed to link a Netgear
DM111P to a Linksys WRT54G and make it work, thing is I have 2 working
configs and I'd like to know if one is better, or if both are stupid and
horribly vulnerable.
Please be kind.

I have a dynamic IP
Modem ip: 192.168.0.1
Router ip: 192.168.1.1

1st config- modem is set to pppoe-bridging with dhcp on (in pppoe mode
it can't be turned off) , router's internet connection dialog set to
auto-dhcp.
Router internet config dialog shows:
Connection : Auto-dhcp
IP address : 192.168.1.1
Subnet : 255.255.255.0
Default gateway : xxx.xxx.xxx.N+1 , being the IP assigned by ISP
xxx.xxx.xxx.N
Modem manages the connection/disconnection to internet, being still
accessible trough browser at 192.168.0.1 (this puzzles me because i
though it wasn't going to work, since router's gateway is set to another ip)

2nd config- modem is set to rfc-bridging, this turns off modem dhcp,
router internet connection set to pppoe.
This way router manages connection/disconnection to internet, and modem
is no longer accessible at 192.168.0.1
Router internet config dialog shows:
Connection : PPPoe
Ip address: ip assigned by ISP
Subnet: 255.255.255.255
Default Gateway : ISP's gateway

There's an option for connecting the router to a static Ip (which is
obviously not my case) but i tried to set static IP to 192.168.0.1 just
to see what happened... didn't work.

My limited knowledge suggests me 1st is better (lan before router - lan
between router and modem - internet , maybe?), but i can't tell the
difference between a wan port and my butthole, so I confide in your
experience.
Thank you.