What software is available to simulate a LAN?

VMWare is a very strong solution. You should look at creating a team in VMWare Workstation to bring up your mini LAN.

This tends to mimic reality very well and can be reconfigured on the fly.

Unless you have something very strange in mind, VMWare workstation can help you simulate just about anything a real LAN could encounter.

Check out WANEM - The Wide Area Network Emulator. It's a utility available as a bootable iso or a VMware appliance. It can simulate various network characteristics (bandwidth, rtt, packet loss/reordering/corruption, jitter, etc) by setting the parameters in a simple web interface and routing your traffic through it. I used it myself to simulate/optimize network traffic between Germany to India - but in my local test environment.

If you're running cisco equipment, you can use GNS3 in conjunction with VMWare to build even more complicated networks.

virtualBox. free, excellent, many forms of networks that you can build with it.

Slightly tangential, but if you want a virtual router to throw in there, check out vyatta. It's an opensource router platform, and there's a VMWare image you can download.

If you want alternatives to using VMWare, you could consider a Xen based system such as Citrix Xenserver (which is free, unlimited use) or Virtual Iron (some free/restricted versions).