the solution can be found at http://support.microsoft.com/kb/q187228/
details (taken from the above website):
This behavior occurs because Windows 98 does not send plain text passwords to Server Message Block (SMB) servers by default.
Configure the Samba server to support Challenge-Handshake Authentication Protocol (CHAP) password encryption. Please refer to your Samba documentation for information on how to configure a Samba SMB server.
NOTE: This is the preferred method to resolve this issue because it is more secure than sending unencrypted passwords over the network.
You can enable Password Authentication Protocol (PAP) plain text password use in Windows 98. To do so, use the following steps.
WARNING: If you enable plain text password use in Windows 98, all passwords are sent on the network in an unencrypted format. These passwords may be viewed by anyone using a network monitoring program. If security is a concern for your network environment, do not enable plain text passwords.
1. Insert your Windows 98 CD-ROM into the CD-ROM drive.
2. Click Start, and then click Run.
3. In the Open box, type <drive>:\tools\mtsutil, where <drive> is the letter of the CD-ROM drive that contains the Windows 98 CD-ROM, and then click OK.
4. Right-click the Ptxt_on.inf file, and then click Install.
5. Restart your computer.
You should use the following method only if you do not have access to the Windows 98 CD-ROM. These steps enable PAP password use without the CD-ROM as mentioned in method 2.
1. Start Regedit.exe.
2. Locate the following key in the registry:
3. Change the data value for the EnablePlainTextPassword value to 1.
4. Restart your computer.