For network monitoring you'd need a firewall/web proxy device set up between the network and the internet. Something like
Smoothwall isn't too hard to set up if you have a spare old computer lying around. It's free, and it would provide all the logging you would need.
To stop access to your computers I'd recommend some sort of personal firewall on all the machines. The standard Windows XP built in firewall could do the trick, though you might be better off with something like ZoneAlarm.