What role did they servein WWI or WWII if any? Have they ever really been involved in any 20th century conflicts?

The were on the ententes(Britain, France, Russia, Italy) side in ww1. They remained neutral in ww2.

As Yoda Power said, Portugal fought in the WWI in the western Front and Africa, and was kinda neutral in WWII, which meant that Lisbon turned to a nest of spies from both sides during the war, but normally the government would accept the requests and demands of the Allies in most cases.
Portugal was also involved in the Colonial War in Africa between 1961 and 1974 (Angola, Mozambique, Guinea Bissau), because the dictatorial regime of the time refused to grant independence to their colonies. There was a coup d'état in 1974 that brought a democratic government and it was by then that they ended the war and conceded the independence to every colony, the ones where was war, and the peaceful ones as well.

Did they maintain a number of colonies unbtil that point?

Yes, until 1975 when they (the african colonies) became officially independent. The indian colonies were taken by force by the indian army in 1961, East Timor was invaded by Indonesia when they had just became independent and only recently regained it again, and finally Macau went to China in 1999 in the same way Hong Kong 2 years before.
Like Vietname for America, the african war was also very important politically and socially in the 60s and 70s, and it was perhaps the main cause of the 74 democratic revolution. Despite the fact that the war was almost won from a purely military point of view, the political and social pressure, domestic and international was too big, and after the revolution, the first priority was give independence to every territory in Africa.

Also, you can count the Kosovo NATO campaign a few years ago and a few campaigns in the early XX century against native rebels in Africa.

As lame as it sounds, I read in a little book on Portugal that they wanted to join up with the Allies in WW2, but the world situation (being next to Spain and a bit away from the Axis occupied territory) made it dangerous to openly declare war.

Probably wrong, but it strikes me interesting nonetheless, especially since MCDread said they accepted most Allies' requests.

That's not so lame. Portugal is Britain's oldest ally. We have ties going back a very long way.

SPain had the Spanish Armada and Britain had a dominany Navy. Did Portugal ever boast a powerful Naval Fleet?

Yes, of course. Portugal is famous for its sailors; Portugal sent some of the most corageuros and valiant expeditions of the history, reaching India going down to Africa and up to India.

Even more, the instalations of Lisboa and other cities were used to build many ships for the Spanish Armada in the years that Spain and Portugal shared king ;)

Originally posted by yaroslav
Yes, of course. Portugal is famous for its sailors; Portugal sent some of the most corageuros and valiant expeditions of the history, reaching India going down to Africa and up to India.

Even more, the instalations of Lisboa and other cities were used to build many ships for the Spanish Armada in the years that Spain and Portugal shared king ;)

I once read an estimation of one third of the Armada ships being of portuguese origin. There would certainly be a great number of them, and I believe the Armada gathered and set sail from Lisbon.
But all was lost during those years, and after Portugal restored her independence from the Habsburgs, the country would never have a decent navy again. Although the immediate years saw some successes in driving dutch and french out of the portuguese possessions in Africa and Brazil, occupied during the time when Portugal was ruled by the kings of Spain.