Is a modem enough? Or do I need a router?

No, really, that's my question. Bear with me; I'm ignorant of how this is supposed to work, though I think I understand the very basic principles.
I have an old zoom modem that for six years has wirelessly connected my iMac to the internet. The network is sometimes very unreliable and I have to restart the modem and fool with settings to get it working again; that sometimes fixes it for several months, but sometimes I get dropped freqently for weeks before something fixes itself. However, the network always shows up in the drop-down list. I'm in an 800 squ. ft. apartment in a large building and surrounded by 15 or so home networks, but I'd like to add a wireless printer and connect remote speakers with an Airport Express, so I want it solid before I start playing with more devices.
Given the number of wireless setups around me, I recently I decided to make my network more secure because the modem was not encrypted and I had no wireless security set up in my network preferences. But as soon as I started playing with encryption on the modem and/or adding WPA2 security on the network preferences, everything became unstable. The network still shows up in the drop-down list (the one that comes up when I click on the network icon in the menu bar), but it usually wants me to enter a WEP password and doesn't let me connect, etc. If I reboot the modem and restart the computer (I think the latter helps) I get a connection; that might work for several days or for only hours. Sometimes rebooting the computer helps too. But, like I said, the only time I have anything that stays stable for any length of time is with no security.
So I've got to do something. People are always talking about routers connected to modems, but the guy at my ISP said that for my purposes a modem alone would be enough. He suggested connecting an ethernet cable and creating a new network to see if that alone will help, and if the wireless setup still doesn't work I should replace the modem.
So, considering my modest demands on the network, do I need a router? Shouldn't a wireless dsl modem be enough, even if I need to replace this one?
Edited to add: my understanding is that everything on the network is connected to the modem, which is why he said the modem is all I need. Is this wrong? I just got an iPod touch and all I had to do was sign in to the network. Right now I've had a few days of stability, so I haven't gotten so see if it loses the network when the iMac does.

A potential problem with a non-Apple router is compatibility. Some brands tend to be better than others. Also there is the question of support. Few if any mfgrs. provide support for Macs. That said I would give a qualified thumbs-up to D-Link routers. They do work well with Macs and can be easily configured with a browser. Mac support is available although minimal. D-Link also sells access points that can be used much like an Airport Express.
Any problems with WPA on your Zoom is likely because it's very old. The modem may not even be DOCSIS 2 compatible given its age.
Consult with your ISP to determine what they recommend for a replacement modem or what they currently provide in new installations. Whatever you do a new modem may require provisiioning with the ISP.
I don't believe Tesserax or I made conflicting statements about needing a router to connect multiple devices. If there's any question here, then the answer is, "Yes. You need some type of router to connect multiple devices. It could be separate from the modem or it could be built-in to the modem like what you now have.

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Is a modem enough? Or do I need a router?

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