Couple of choices.
At your PC if you wish to keep your USB modem then it will just need a wireless pci card or wireless USB dongle. You can then use Internet Connection Sharing (ICS) in your PC and it will then act as the gateway/router for your son's PC and Xbox.
Alternatively you could sell your USB modem and go for a wireless router/ADSL modem. It will act as the internet gateway and you won't have to use ICS on your pc. This means your pc won't have to be always on for your son to access the internet via his Xbox and pc. The savings on the electric bill will probably mean the wireless router is the more cost effective option, plus it's better to have a hardware firewall. If you get a wireless modem/router with a built in print server even better; you and your son will be able to share a printer across the network, again without the dependency of one or the other PCs being on.
Best architecture at your son's end is to go for a Wireless Access Point (WAP) with a built-in 10/100 Ethernet switch (at least 2 port). You can set this up in bridge mode to connect wirelessly to your modem/router. You then connect your son's pc and Xbox to the WAP ports using Cat 5e patch cables.
I would go for 802.11g 54Mbps wireless. If you want to get the best speed and connectivity, particularly with the full security options available, make sure you buy the same brand for all your wireless devices.