Thanks for your help, Christof.

I had to research the issue a bit more on the web till I finally got the scenario to work.

Here's a very thorough explanation of dcomcnfg on windows 98:
http://www.active-undelete.com/dcom-configuration.htm

The key to my problem was in modifying my network settings in the 'Access Control' tab, set 'user-level access control' to true and then specify a DOMAIN controller (the machines don't log on to the domain though, that is the strange part).