SME is one of the best (if not the best) gpl server software. But when comes to the protecting network it's isn't the best choice.
Why. First, it doesn't have a easy grafical interface to manage firewall (there is an ad on, but it's basic).
Second, it does needs a better hardware to runs smootly.....And so on.
Your p166 should be more than enough to server as a gateway for your samall network, therefore I would suggest to use some other software, unless you're serving a web page off of your sme machine. If you need web server functiionallity, you should go with p2 with at least 128 meg of ram.
If you needs just basic mashine to share internet and have easy to manage interface for firewalling, use p166 (more than enough) and get other distro.
I would recomend Ipcop - easy to use & p166 would be more than enough. This distro is designed to be used only as firewall and nothing else (you do have an proxy server, intrusion detection system...) and as sme ist's free and have free support web site - with a lot of friendly people (as sme forums here

)
you can get the iso image at
http://ipcop.hopto.org second one that i woul recomend is coyotelinux (flopy version) doesn't have as many features as ipcop but it will run on 386 never mind p166

There is als9 Clarkconnect, but it's also using 2.4 kernel and it does need better hardwrae than p166 in order to use all of the features.
Good luck,
Trbonja