Keef,
With a Router, ZA is not needed. You could leave ZA on for a couple of weeks just to verify your Router is doing its job. Then delete it.
You can run Routers with or without DHCP. For work, I manually assign all the IPs and DNS's. At home, I just use DHCP. It is all personal preference.
As for Generic Host Process, this article might help:
A Description of Svchost.exe in Windows XP
For what services to run, there is no better recourse than Black Viper:
Windows XP Home and Professional Service Configurations
Take Care,
Richard