To the OP, there's youtube, hulu plus, or each network's website might have full shows as well. Netflix works on an Xbox quite well so buy one of those- there's also other streaming video apps available on Xbox live, but some are subscription based last time I checked.
I never stopped using Usenet. When the ISPs killed off free access- most people didn't switch to a paid service like easynews or giganews and beginning circa 2008 there was definitely less diversity and obscurity in binaries posts. Maybe not easy to understand for every day users compared to torrents (formats, joiners, what to do with missing parts, etc.), but you're not uploading anything when you're downloading. Not to plug easynews, but they even have a web portal that joins all the parts for you and you can download everything at ISP speeds over HTTPS. Much better than dealing with trickle speeds you get from the more obscure torrents.
I am a Linux hobbyist and can comment on the Linux router option. Totally free if you have old hardware, but limited and will not cover all of your listed requirements.
This sits between my ISP's provided modem and my wireless router which serves the living room computer, bedroom, office, and a wireless laptop and phones using wifi.
I use Debian 6 on an old Semperon with 1 gig of RAM with two NICs. Overkill I know, substitute your hardware on hand and Linux needs here. It's nice having the option of a full desktop if you need it, but I usually ssh into it and have run it headless before. I have isc-dhcp-server installed.
For live viewing I open a terminal in Gnome or ssh and run screen split into a four-way window. Two screens run iftop- one for the external card and one for the internal card. The third window runs tshark for packet sniffing. You can export tshark's output into a log for examining of network traffic, sites visited, etc.
urlsnarf (part of dsniff) will also allow you to log sites (URLs) and it logs from all sources (phones, etc. as long as they are using the home network). This is proof against deleted browser history or content to confront someone suspected of illegal activity in the house, cheating spouses, crappy house-mates, etc. msgsnarf comes with dsniff and supposedly can log messenger traffic, but I have no experience with it.
Logkeys is a keylogger and will log anything as typed from the keyboard on the machine it is installed on. This won't work for phone logging obviously and conversations are one-sided.
If your client is jealous, paranoid, suspicious, or needing to protect themselves then a setup like this would work adequate with minor blind spots and annoyances. I'm just a hobbyist and have used these things (logkeys is good for saving school papers if your word processor crashes). No doubt there are even better options out there, but for someone who is not technical it may work well- as long as they know how to access logs, etc. on linux or you could aggregate it somehow.