Caveats using NAT
As we have already explained to some extent, there are quite a lot of minor caveats with using NAT. The main problem is certain protocols and applications which may not work at all. Hopefully, these applications are not too common in the networks that you administer, and in such case, it should cause no huge problems.
The second and smaller problem is applications and protocols which will only work partially. These protocols are more common than the ones that will not work at all, which is quite unfortunate, but there isn't very much we can do about it as it seems. If complex protocols continue to be built, this is a problem we will have to continue living with. Especially if the protocols aren't standardized.
The third, and largest problem, in my point of view, is the fact that the user who sits behind a NAT server to get out on the internet will not be able to run his own server. It could be done, of course, but it takes a lot more time and work to set this up. In companies, this is probably preferred over having tons of servers run by different employees that are reachable from the Internet, without any supervision. However, when it comes to home users, this should be avoided to the very last. You should never as an Internet service provider NAT your customers from a private IP range to a public IP. It will cause you more trouble than it is worth having to deal with, and there will always be one or another client which will want this or that protocol to work flawlessly. When it doesn't, you will be called down upon.
As one last note on the caveats of NAT, it should be mentioned that NAT is actually just a hack more or less. NAT was a solution that was worked out while the IANA and other organisations noted that the Internet grew exponentially, and that the IP addresses would soon be in shortage. NAT was and is a short term solution to the problem of the IPv4 (Yes, IP which we have talked about before is a short version of IPv4 which stands for Internet Protocol version 4). The long term solution to the IPv4 address shortage is the IPv6 protocol, which also solves a ton of other problems. IPv6 has 128 bits assigned to their addresses, while IPv4 only have 32 bits used for IP addresses. This is an incredible increase in address space. It may seem like ridiculous to have enough IP addresses to set one IP address for every atom in our planet, but on the other hand, noone expected the IPv4 address range to be too small either.
Example NAT machine in theory
This is a small theoretical scenario where we want a NAT server between 2 different networks and an Internet connection. What we want to do is to connect 2 networks to each other, and both networks should have access to each other and the Internet. We will discuss the hardware questions you should take into consideration, as well as other theory you should think about before actually starting to implement the NAT machine.
What is needed to build a NAT machine
Before we discuss anything further, we should start by looking at what kind of hardware is needed to build a Linux machine doing NAT. For most smaller networks, this should be no problem, but if you are starting to look at larger networks, it can actually become one. The biggest problem with NAT is that it eats resources quite fast. For a small private network with possibly 1-10 users, a 486 with 32 MB of ram will do more than enough. However, if you are starting to get up around 100 or more users, you should start considering what kind of hardware you should look at. Of course, it is also a good idea to consider bandwidth usage, and how many connections will be open at the same time. Generally, spare computers will do very well however, and this is one of the big pros of using a Linux based firewall. You can use old scrap hardware that you have left over, and hence the firewall will be very cheap in comparison to other firewalls.
You will also need to consider network cards. How many separate networks will connect to your NAT/filter machine? Most of the time it is simply enough to connect one network to an Internet connection. If you connect to the Internet via ethernet, you should generally have 2 ethernet cards, etcetera. It can be a good idea to choose 10/100 mbit/s network cards of relatively good brands for this for scalability, but most any kinds of cards will do as long as they have drivers in the Linux kernel. A note on this matter: avoid using or getting network cards that don't have drivers actually in the Linux kernel distribution. I have on several occasions found network cards/brands that have separately distributed drivers on discs that work dismally. They are generally not very well maintained, and if you get them to work on your kernel of choice to begin with, the chance that they will actually work on the next major Linux kernel upgrade is very small. This will most of the time mean that you may have to get a little bit more costly network cards, but in the end it is worth it.
As a note, if you are going to build your firewall on really old hardware, it is suggested that you at least try to use PCI buses or better as far as possible. First of all, the network cards will hopefully be possible to use in the future when you upgrade. Also, ISA buses are extremely slow and heavy on the CPU usage. This means that putting a lot of load onto ISA network cards can next to kill your machine.
Finally, one thing more to consider is how much memory you put into the NAT/firewall machine. It is a good idea to put in at least more than 64 MB of memory if possible, even if it is possible run it on 32MB of memory. NAT isn't extremely huge on memory consumption, but it may be wise to add as much as possible just in case you will get more traffic than expected.
As you can see, there is quite a lot to think about when it comes to hardware. But, to be completely honest, in most cases you don't need to think about these points at all, unless you are building a NAT machine for a large network or company. Most home users need not think about this, but may more or less use whatever hardware they have handy. There are no complete comparisons and tests on this topic, but you should fare rather well with just a little bit of common sense.
Placement of NAT machines
This should look fairly simple, however, it may be harder than you originally thought in large networks. In general, the NAT machine should be placed on the perimeter of the network, just like any filtering machine out there. This, most of the time, means that the NAT and filtering machines are the same machine, of course. Also worth a thought, if you have very large networks, it may be worth splitting the network into smaller networks and assign a NAT/filtering machine for each of these networks. Since NAT takes quite a lot of processing power, this will definitely help keep round trip time (RTT, the time it takes for a packet to reach a destination and the return packet to get back) down.
In our example network as we described above, with two networks and an Internet connection we should, in other words, look at how large the two networks are. If we can consider them to be small and depending on what requirements the clients have, a couple of hundred clients should be no problem on a decent NAT machine. Otherwise, we could have split up the load over several machines by setting public IP's on smaller NAT machines, each handling their own smaller segment of the network and then let the traffic congregate over a specific routing only machine. This of course takes into consideration that you must have enough public IP's for all of your NAT machines, and that they are routed through your routing machine.