Have you checked the internet settings? Go to the desktop, right-click on the IE logo and select 'properties'. On the tab 'connections' check that the correct dial-up connection is set as standard, and that 'always connect using standard' tick box is ticked.
That's all I can think of right now, you may already have checked that of course.
Edit: reading your post again, obviously you already did that
Something else that I just remembered: on Win98 my girlfriend sometimes 'canceled' the 'enter password' dialog box that turned up when starting up, even though the password was 'empty'. This would have the side effect that my dial-up password would not be remembered by Windows. Something similar perhaps?