"Which modem would you recommend (good value)"
I would say Netgear.
"It says you’ll need to enter ISP info in the system area, so I hope that’s straightforward our ISP is Plus.net."
I know when I set my PS3 up, it was just a matter of connecting the Ethernet cable from the PS3 and into the Modem/router, I basically went into the settings on the PS3, it then detected my connection method etc and that was it.
"When he’s on xbox live assuming we get it all working, will it affect the PC’s internet connection (different telephone extension point, same line)."
You would notice a slight slowdown on both the Xbox and the PC when both were online at the same time, you would notice it more so if you were downloading something, i.e. It would take longer to download, also if you stream video from BBC Iplayer for example you may find that the video playback would be choppy. :-)