Wireless is a reasonable way to do this. I have the same type of setup in my home. The cable modem sits down in the finished basement where my main systems are, with a Linksys WRT54G wireless router. That router provides both wired and wireless access in that area. Now upstairs in my bedroom I have a number of other devices that need Internet access, wired TiVo and a network ready HDTV, as well as my PowerBook, which kind of migrates around. Instead of running an ethernet cable, I simply got a Linksys WAP54G and put it in repeater mode and hooked up the wired systems to the WAP, which then talks to the main router, which gives access to the outside world. So in essence I have my network split in two and each half is connected via a wireless link. It works great, it's secured and it gives me wired and wireless access in both parts of the house without having a run a bunch of long ethernet cables through the floors and walls.
And the nice thing about wireless if you have a decent router or WAP is AP Isolation. Basically, it seperates your wireless connections from each other so that they can pry into the others data transmissions. By default AP Isolation is turned off on Linksys routers (I think), but it's a simple thing to activate.
