Here's a weird behavior. My PC freezes if I re-enable the LAN. No BSOD, no logs in event viewer, nothing on the hijackthis log...
I've noticed that LAN (along with the modem connection) tray icon disappeared moment my anti-virus started updating itself. I'm updating it regularly and it never behaved this way. I suspect that it has something to do with anti-virus software (BitDefender) or the installer (or whatever the update routine for the AVS is).
Anyway, when that happened I've opened up the proprieties for the LAN connection and my IP address was 0.0.0.0. I've hit the "repair" button and it came back to normal, but the traffic seized. At that time my PC was still connected to the internet via modem, but somehow windows were acting as it weren't and, instead of connection status window, I got a dial window. Off course, it couldn't open up a com port. It was already open. Anyway, only way to sever the modem connection was to reboot windows, so I did just that. After a reboot I've noticed that the LAN connection works one way only (packets are being sent, but none or one received). Configuration seemed as usual, repair button didn't jump-start the usual traffic.... That's when I decided to disable and re-enable LAN and BAM! - Immediate and total system freeze!
Rebooted and tried it again, and got the same effect.

The present situation is:
LAN is connected, PC to PC via xwire, workgroup only, firewalled by ActiveArmor only and is configured to allow other PC to send packets, no other firewalls enabled (windows nor AVS)
All of the drives are shared and cross-accessible, yet there is no traffic unless I'm accessing the drives across the LAN.
And every time I disable and re-enable the LAN it does the same - freeze.

Hardware info:
XP SP2 Pro, ASUS A8N Sli mobo with 1 Gbps NVIDIA nForce networking controller, (100 Mbps realtek on the other side, win 98se)
Everything up-to-date (drivers and windows patches).

Solved.

Here's what I've done:
First of all, I've found out that same freeze happens when I disable and re-enable the driver directly via device manager, so I've uninstalled the driver. I know that it would be sane thing to pursue right away, but it wasn't my first choice of action because the NVIDIA's firewall is moody piece of work without poking around the drivers it depends on.
After that I've hit the "scan for hardware changes" and the freeze happened again, only this time (after the reboot) there were no more freezes after the re-enabling the LAN. I guess it was a driver issue.
The usual traffic was still missing, (0 packets after a boot + other PC invisible in the workgroup) although the connectivity and accessibility was normal. I've fixed it by creating the Network setup disc on XP side and running it on w98 side.

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