this works better than WEP. there are other set ups that nessecitate vpn, but they usually allow DNS through. MAC/IP address auth based wifi is vulnerable to spoofing. for long term use, i recommned ipsec instead of ssh, but ssh needs nothing more than having an account on the server, so its easy to just install your friends ssh keys.
now, just use ssh to tunnel everything else through your router. see here for more info on ssh tunneling. most apps can use a socks proxy natively.
type "about:config" in the url bar and set network.proxy.socks_remote_dns = "true"
some versions of netcat wont do socks so you cant use them to push ssh through. use connect.c. you can make scripts for ssh and scp like this,
pixel@ryo-oki:~$ cat bin/sockscp scp -o "ProxyCommand /home/pixel/bin/connect -S 127.0.0.1 %h %p" $*