Can my Computer Work as a ADSL router?

Basically yes - you would need a computer with an ADSL port and an Ethernet port - or a computer with two Ethernet ports and a separate ADSL "modem" to connect to the WAN ethernet port.

Then you would need to run an operating system which can "route" (XP or Linux can do this). If you just want to dedicate the machine to the job of Being A Router, then Linux is going to be easier.

But you don't need a "very fast procesor". Compared to your average PC, an ADSL router, even one with firewall and Multi-VPN capabilities, is running quite a slow processor. If it's the only task in hand and you're not doing deep packet inspection, it's not that CPU intesnsive compared to current generation processors. You would probably find an old Pentium 3 man enough for the job.

you would stil lneed a adsl modem to make make the connection to your ISP.
you can get internal ADSL Modems or usb adsl modem, or a adsl router capable of bridge mode it will assign the external ip address to your PC.

Then you will need to use internet connection sharing to share out your connection.

Why do you want to do this? so much more that can go wrong with a PC, uses more power (going green...everyone is doing it)

I should also point out that a new dedicated ADSL router will cost you about £20, or maybe as much as £100 for one with a full feature firewall and VPN - but still  a lot cheaper than a PC, esp when you factor in the power consumption (see Louis E note) and also reliability. And noise. And space used up.

yes you can use virtually any old pc as a decent adsl router firewall

see http://ipcop.org/

DSL routers with modem dsl port can be configured in a bridged mode where the router functions are not used.
Any other router including a PC can then be connected to the lan port and perform routing functions.

The reason i want to do this is to monitor the Network Traffic like which protocol is using how much bandwidth, which IP address is generating how much traffic, etc.... Is this a good idea to do or are there any better solutions out there.

It is perfectly reasonable. The combined routers have only primitive log and qos shaping features.

Smoothwall is ideal for this if you are using a spare PC for the firewall.

http://www.smoothwall.org/

It's simple to set up and offers Proxy (Caching Proxy) and excellent firewall options. Very much a turnkey solution. It's also very quick and easy to manage with it's on web interface.

Even on a very old spec machine it will run very fast indeed, I use one for web caching at home.

Quite a lot of schools are using these too, some with additional stuff like email server and web server etc

If you are using the PC as a workstation though it's not at all suitable.