I wante to make sure I understand this correctly. If I put a Cisco IDS appliance behind my Internet router and it detect suspicious activity, it will dynamically create access-lists on the router? (7204vxr 12.x IOS)
That is correct. The sensor will telnet to the router through the command and control interface and create access-list entries based on signature action. This functionality is called shunning. Note that you have to configure signatures for action shun aswell as configure the shunning device paramaters.
The link below demonstrates this using a unix director: