As I re-read your post I see the version numbers.
What does the SQLNET.ORA from the server look like.

I remember a similar problem with 7.3 clients and 8i server.
Something in SQL net changed between 8 and 8i and I can't remember what it was.
It's a new SQLNET configurable parameter that defaults the wrong way..
If I see you SQLNET.ORA from the server I will remember.