I've replaced my 2Wire ATT DSL Router/Modem with a new AT

I'm trying to set up Time Capsule with my AT&T DSL modem, can I connect all PC's in the house wirelessly or does one need Ethernet?

If all of your PC's are wireless capable, you can certainly hook them all up via wireless......unless you have more than 50 PC's.  That's the limit for wireless connections on the Time Capsule. You can add another 150 Ethernet devices, though.
However, if you are configuring the Time Capsule in Bridge Mode, it is the 2-Wire gateway than is controlling the number of devices that can connect.
You won't be able to remove the 2-Wire gateway from your network unless you replace it with a modem.  The 2-Wire provides both modem and router functionality in one box. As you know, the Time Capsule does not have an on board modem.

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