I's suggest you do it through the hardwired connection. If you do it over the air, as soon as you set it, you'll lose your connection. If you're like me, you'll then type the wrong WEP into your laptop, and spend an hour trying to figure out why you can't reconnect.
To your second connection, as long as your systems are properly firewalled, there's not a huge risk of direct harm, otherwise places like Panera wouldn't do it. The real risk is that someone will bog down your network with heavy downloads, affecting your speed, and possibly violating your ISP agreement regarding sharing the connection.
Worse, if that person is downloading something illegal, you could find all your equipment suddenly sitting in the local FBI office while the sort things out. I believe that's a violation of due process, but the FBI doesn't generally listen to what I believe.