Lets see if i can get this ball rolling and get some other people involved:
Now, questions:
1. Is this the right way to be going about this? Is there something easier that I'm missing to make the network much more simple?
Well, you have so much above that it would be simpler to just start at step one and go from there. Which i hope would answer the rest of the questions.
Ok, hopefully i understood everything you wrote. If the PC on the very bottom floor (source) is the PC with the internet then that is where you start. That computer would need a wireless router in order to broadcast the signal through the house. They kind of router you buy is up to you, my person preference is Linksys because i find them easy to work with.
Next, each of the other computers would need something that could pick up the wireless signal. You can do this several ways. One being to put a wireless router on each to pick up the signal, or you could install an NIC card (and no they are not expensive, you can get a good intell card places like Newegg.com for about $30-$35). Or lastly they sell things for p3eople who play games online called gaming adapters. Their only purpose is to pick up the wireless signal so you can use the internet on something else (like a laptop, gaming console, or anything else with an ethernet port)
I think either the NIC card or gaming adapter would be the easiest way.
Then comes the fun stuff. Most good routers will come with security, now it is totally your choice as to using it or not but i strongly suggest it. If you leave it open then anyone in the area close enough to pick up your wireless signal (with a laptop, Ipad, Iphone or anything wireless) can just freely use it. If you use the router security that just means that anything you want to pick up the wireless signal will need to be configured (usually just using a few simple things you will find in the router settings page online). Usually you need the SSID name (whatever name you chose for your home network, a lot of people just call it home, LOL). Then you will have a type of encryption like WEP, WPA, and so on. Then there will be a security key and password. Those can either be chosen, or you can let the router just generate something random.
So if you used a gaming adapter you would plug that into your main router and it would have some software disk you put in that computer. You would enter the above things into the settings of the gaming adapter where it asks for them and save it, then take it to the computer you want to pick up the wireless signal and hook it up there and it should be fine. With the NIC card all of those settings should be configured by setting up a new wireless network on that PC.
I know it sounds complicated but it really isn't all that hard.
Now whether a signal will go up through two floors of a house will be the question, and the only way to tell is to try it. When you are talking floors you are talking about like up a set of stairs all in one house and not like one apartment on top of another right? Because that may take someone with a higher level of experience than me. I would just say in a regular house if you could not get a good signal on floor 1 or floor 2 you would just need to put in a signal extender between the source computer and each floor to extend the wireless signal so you can pick it up. But a lot of them have a pretty decent range that the wireless signal can go. I am often at other peoples houses who have wireless and i go to get on my Iphone and it will show me several different choices of wireless i can use, which means i am picking up the signals from the surrounding houses as well as theirs.
Hopefully all that makes sense and if there is an easier way someone will chime in.