We present both experimental and theoretical investigations of the operation of a harmonically modelocked erbium fiber ring laser stabilized by an intracavity bit-rate etalon. Our model analyzes the effects of cavity components and operating parameters on laser stability and output pulse characteristics. The model predicts the output pulsewidth variation with laser cavity parameters such as cavity length, dispersion, and finesse of intracavity Fabry-Perot etalons. If the laser cavity length is not optimized, a maximum 50% increase in pulsewidth can occur at 5 Gb/s pulse rate. A repetition rate etalon with a finesse of 50 is sufficient to provide a side-mode suppression ratio of over 50 dB in the laser output. We also discuss how detuning from the optimal modulation frequency increases the excess noise that affects the laser stability. The theory predicts a maximum detuning range of /spl plusmn/100 kHz, which agrees with the experimental observations. These theoretical results can guide the design of similar lasers over a wide range of operating parameters.