Will Port Forwarding defeat a router's purpose?

Forwarding a port to your computer does essentially open it up to the world on that port. Could someone possibly use that to get on your computer? Maybe. But unless you have something extremely valuable I doubt many people would go through the time and effort to do it.

If you have a nice firewall it will still inspect all of the packets going through so there will still be protection. Check your routers specs and see if it does SPI (stateful packet inspection). I think some home routers have spi in one form or another but it is definatly more common on higher end firewalls like buisness class netgears, cisco PIX, firewall appliances, etc.