Dial-up networking issue

Dear all,

Recently I have come across a very peculiar problem on a Windows 98 SE
machine, which connects to the Internet via dial-up networking; now,
in the "Connections" tab under Control Panel -> Internet Options,
there are three choices, "Never dial a connection", "Dial whenever a
network connection is not present" and "Always dial my default
connection".

I can select the outermost two of these fine; if I select the middle
option (which always used to be selected) and click "Apply", it does
eventually take, but causes the dialog box to pause with an hourglass
for about two or three minutes.

Furthermore, if the middle option *is* successfully selected, then
Internet Explorer makes no effort to open the dial-up box upon
startup, but instead fails to connect, reporting a DNS error;
similarly, Symantec Live Update, when run, does not attempt to connect
to the internet, but instead reports a failure to contact the Symantec
servers. Finally, Outlook Express which is set to send/receive mail
upon startup simply hangs. All in all, the programs are acting as if a
network connection were present; unfortunately, since no such
connection is actually present, they all fall over and complain.

Now, if the bottom-most option ("always dial my default connection")
is selected, then Internet Explorer brings up the dial-up connection
box as desired; however, Outlook Express does *not* connect upon
start-up, but instead will pop up the connection dialog after about
three minutes' use.

Does anyone have any ideas? I've tried the usual
(uninstalling/reinstalling dial up networking, tcp/ip drivers, modem
drivers et al et al)

Thanks

Richard