You can trim the VLANs on your trunk, or you can leave trunk set to ANY. ANY allows the SOHO to traverse all 802.1Q VLAN traffic across your trunk. This is typically a good thing.
Using your example above, if you change port 1 on the NetGear switch to VLAN 2 and connect a computer to it, that computer will not have any internet access. That computer would not be able to connect to the router to pull down a DHCP allocated IP address or the DNS configuration. The trunk linking the NetGear switch and SOHO has been pruned to just VLANs 1 and 3. You would need to add VLAN 2 to both sides of the trunk (that is, in both the SOHO and the NetGear web interface) to have VLAN 2 traverse the trunk.
Alternatively, if you leave SOHO set to TRUNK and ANY, you would only need to add VLAN 2 to the NetGear side of the trunk.
I skimmed the user manual for NetGear ProSAFE Gigabit Web Managed (Plus) Switches, and I recommend using the 802.1Q-Based VLANs in Advanced Configuration. The Port-Based VLAN setup limits you to VLANs 1-5 (the maximum is the number of ports on the switch). The 802.1Q Basic Configuration does not provide for defining Access (untagged) or Trunk (tagged) ports.
You should set port 5 (your trunk link to the SOHO) to carry, at a minimum, VLANs 1 and 3. Next configure ports 3 and 4 to carry VLAN 3; ports 1 and 2 to carry VLAN 1.
Next you will need to configure tagging using VLAN Membership. For VLAN 1, set ports 1 and 2 to untagged and port 5 to tagged. For VLAN 3, set ports 3 and 4 to untagged and port 5 to tagged. If you add additional VLANs to the trunk on the SOHO side (or set to ANY), you will need to add those VLANs as tagged on port 5. Ports that connect to computers, Xbox, etc will almost always be access ports and have a single untagged VLAN. Trunks will always be tagged with one, more or all VLANs.
Your last step will be to set the PVID for your access ports. The PVID adds a 802.1Q VLAN tag to ethernet frames entering the port; this will almost always be the same VLAN as the untagged VLAN on the port. Trunk ports don’t need a PVID. Set the PVID to 1 for ports 1 & 2. For ports 3 & 4, set the PVID to 3. You shouldn’t need to set a PVID for port 5, since it’s your trunk. However I’m not familiar with NetGear switches, so it might complain. If it does, set PVID to 1.