I have been using a wireless connection with Live for a few months. I set it up ready for the online footy and Halo 2. I am using Linkysys 54g wireless router and ethernet bridge. Purchased from Amazon, they are about as cheap as you will find for their Stuff.
There isnt any lag if you get decent kit and set it up right. Linkysys kit is made by Cisco systems and most of the www backbone was built using Cisco hardware, so they know what they are doing. Its a good as you will get for cheap money.
It really is worth spending a bit extra buying decent stuff. It will be much easier to setup and produce a more stable connection which is of course important for online gaming. Remember wireless connections are not supported by Xbox Live in Europe (Officially). Therefore MS tech support people wont be able to offer you any help if you get problems.
This is a shame as they do support it in the US (Hence the availability of the MS wireless gamming adapter there but not in europe)
There is another thread on going about this at the moment, as I said there being honest its not particuarly easy setting up Live with a wireless bridge. I have some knowledge of networking and it still took me a while to get it working right. I dont want to put people off; loads of people on here have it working no problems, what I am trying to say is that for the novice it is strongly recommended to buy decentish stuff like the Liksys kit. Their devices support Live and they will give you help getting it working if (When) you have a problem.