By "not supported" do you mean that any further software/firmware updates will not be compatible with the SB2?
No. The firmware used is the same for both the SB2 and SB3. They're functionally identical and you'll often see 'SB2/3' written to describe them taken together.
My router is a D-Link wireless N. , It looks like the sb2 is wireless-G is that an issue as far as compatibility or speed of data transfer.
Should be fine.
The SB3 has a little bit nicer looking case, but my preference is the SB2. It has a few distinct advantages over the SB3. The biggest one is that the SB2 has an external antenna (plus an internal one), while the SB3 has two internal antennas. Wireless reception is generally better with the SB2, as well as being more flexible in that you can orient the antenna a couple different ways, which can enhance signal strength.
Another advantage is if you want to rebox the SB2, its much easier than with the SB3 and the end result can be a lot better looking. The SB3 has its screen soldered directly to a logic board, meaning that you're stuck with the "tall and shallow" aspect ratio of a new case, while the SB2s screen is separate. You can replace the display cable with a longer one and mount the SB2's display further from the main board. It's just a lot more flexible.
A couple things to be aware of: The Squeebox2 and the original Squeezebox (often called the Squeezebox 1 or SB1) look identical. So don't let yourself get hoodwinked into buying an SB1. The best way to tell them apart is by the label on the bottom, which will say 'Squeezebox2' on the SB2. Second, the SB2 (and I think also the SB3 at one time) were available in wired ethternet only versions, so make sure it has an external antenna connector if you need wireless connectivity.