On the plus side there`s no contract (Check what happens if you subsequently leave in respect of the wireless router - is there a penalty?) It`s cheaper than switching.
On the downside it is Tiscali but so far you haven`t had any major problems yet. I`d perhaps decline their offer of a wireless router and stay with them - you`ll be saving £3 a month. If Tiscali`s problems do affect you, change later. I am with Pipex, now owned by Tiscali and I am taking this exact same approach.