|No he wouldn't need to switch his ISP. If he connects to your router he will be using your ISP. There is no restriction imposed by the ISP on how many people can use a single DSL connection. He can keep the PeoplePC account if he wishes but it will be totally separate from your DSL account.|
As for the email address, if it is one supplied by PeoplePC then he will lose it if he closes the account. If it is one of the public Email providers like Google, Yahoo or Microsoft then he can use that through your ISP as he did before.
The Operating system is irrelevant in this instance. Window 98, XP,Vista, 7 and 8 will all work together on the same network.