getting back to the point though, whether you use a stand alone cable modem, or the cable modem built into the set top box, you can connect to it using ethernet ( the socket that looks a bit like a phone socket - RJ45 )
The great thing about that is you can buy routers that have an ethernet 'WAN' port, much cheaper than ADSL routers (at least you could when I last looked)
I have Linksys BESFR14 ( or is it BEFSR14 ... ) and it works a treat.
oh and the thing with the flashing light is probably an ethernet card, they tend to have lights on them, they flash when data is sent, or to indicate what speed they are running at