Routers are not a good choice for time servers as it complicates configuration and, to some extent, constrains deployment methodology for routers to be effective with time service. We don't run DNS on routers, it is a service. Time service via NTP is a service as well. The NTP daemon in a router is not implemented in hardware and requires CPU resources better dedicated to RIB management.
In my experience, a reliable NTP peer group can be implemented on the same set of boxes as DNS (bind, etc.) with little or no impact on DNS performance. If you can count to four or more, you can make a reliable peer group of time servers.
There are lots of alternatives. CableLabs' designs tend to tie together
DHCP, DNS, NTP, TFTP and headends. DSL forum designs tend to split them apart.
If you have a set of systems which are already configured and accessed
by end-user systems, such as DNS or DHCP or Active Directory, then NTP is just one more protocol with many of the same risks on those systems. Shared fate also makes trouble shooting easier, because a problem will usually affect all of the services.
Other alternatives such as multicast NTP tend to work better with a
device on each LAN (such as a router). And still other alternatives
tend to work better with specialized servers if you need hardware
assist or auditing.
But again, it comes back to what are your requirements. For some
people, the built-in WindowsTime service meets their needs. Other
people need specialized clock hardware connected directly to their
systems.