I've seen all sorts of setup when helping others with their modem:
1) Modem doesn't do anything but act as an ethernet bridge.
2) Modem gives you a private IP address (10.x.x.x or 192.168.x.x), so that you can reach it and setup the user name and password for PPPoE, then it acts as a DHCP server and gives you a real IP address you can use on the net. I think this design helps simplify the setup for PPPoE, and reduce tech support help, and no need to install those PPPoE on clients' computer.
3) Modem from 2 that acts as a router as well
4) Modem from 3 that acts as a wireless router as well.
5) Modem from 4 that acts as a log in server, and require each PC to use wireless security, and a PPPoE adapter, that needs to be logged on every time, for those paranoid ones.
IMO the earlier you use PPPoE the better, so if your modem supports it, let the modem deal with it. This reduces the complexity and processing that the router has to deal with and when problems occur you can always just plug into the modem and trouble shoot. It also makes router runs in a simpler fashion and therefore less likely to step on a firmware bug (all firmware has bug, so keep operations simple and stupid).