I can use the internet on my laptop with my modem not plugged in via Ethernet, so yes.
I just plugged in my 360 to my modem (it works ~ but not wireless).
Just need to do my PC now.
edit; just changed to security to WPA.
edit II; dammit did the wrong one, gonna change to WPA2 now.
edit III; up & running in WPA2.
This is the error window that I get when I enter the right password/key