Both of those are possible to do and relatively cheaply.
You can block ads in the firewall in DD-WRT (other alternative router firmwares are available) or you can set up a Squid proxy on a server if you have one and have all clients use that.
Luckily you don't have to do too much to get a current list as the makers of easylist/adblockplus make their list available.
How you configure it depends on what resources you have available.
Update May 2016: I'm doing a similar thing using pfSense which is more powerful plus the pfBlockerNG addon which creates a dns 'black hole' that redirects requests for certain domains to a 4x4 pixel transparent GIF based on EasyList and the following additional list sources recommended by the author BBCan177...
I have had to add a few missing ad servers and do some whitelisting for servers I want to allow, but it blocks most domains that host malware and advertising.