Using of WiFi router as a controller of DIY home automation system is a good idea. It’s energy efficient, noiseless, reliable, compact and you don’t need additional device. Good example of commercial realisation of that approach is a Z-Wave controller MiCasa Vera, based on WiFi router Asus WL500G Premium. There is also a few DIY projects utilized routers. One of them is Linknx.
As a base Linknx uses a Linksys WRT54GS wifi router running OpenWRT or some other ones from this list. That project is oriented to KNX/EIB technology. To communicate with KNX/EIB devices a home made-interface is used. Users have a good-looking web-interface with Ajax to manage the system. Its live demo version is available here. If you’re building KNX/EIB smarthome system by yourself Linknx might be good option for you.
Another interesting project Home Automation Hub (HAH) is based on cheap WiFi router Livebox. It uses xAP home automation protocol which can be integrated with X10 or C-Bus devices. Integration with 1-Wire bus and I2C bus is done by adding interfaces for them. Also there is a RF transmitter to communicate with cheap RF modules, AVR micro-controller, four relays, a set of input lines and LCD display. The HAH includes software modules for integration with Twitter (can be used as a transport for notifications), Google Calendar and Pachube and offers possibility to send SMS via connected old Nokia mobile phone. HAH is a green project because first of all its power consumption 6 Watts only. And secondly, it reuse old hardware.
A short resume is following. If you need a plug-n-play solution then Vera is your choice. It’s ready made budget solution, used modern Z-Wave technology. If you’re DIY-er and smarthome enthusiast then Linknx or Home Automation Hub might be your choice. They need some customization of hardware but also give an open source flexibility and freedom.