Thats odd. When I set up the same deal for my campus apartment, win2k worked just fine in connecting to the internet. I just set it up as DHCP for both IP address and DNS configuration. I noticed that running it through a hub and all caused really slow connections. Also we were having a lot of problems with external connections to our machines. Have you looked into the possibility of purchashing a router. I purchased the 4 port linksys router for $80.00 at Best Buy. We know have six computers connected to one DSL line. Three running WIN2k, 1 running win98se, 1 running win98, and 1 running Mandrake 8.0.
The router is awfully nice in the fact that it is easy to use and setup and it provides a firewall.