Can you ping anything when connected to the internet, like Yahoo.com or your ISP? Can you ping a IP address as opposed to a name (like Yahoo.com). Ping the following IP address if you don't know any: 216.115.109.6 (This is also the IP address Yahoo.com responds with.)
If a NIC is installed in the PC and TCP/IP is installed as a protocol, you should be able to ping 127.0.0.1 which is the local loop address and get a response. If no NIC is installed, then you need to connect to the Internet when pinging the 127.0.0.1.
When connected to the Internet, type ipconfig /all. You should see two DNS server addresses and a gateway address. If you don't, the WAN connection (dial-up or DSL or cable modem) isn't registering correctly when connecting to the ISP.
My thoughts on your problem: probably just the wrong DNS addresses. Contact your ISP, get the right DNS server addresses. These can make a big difference, since if these are incorrect, your neighbor probably can't get to most domain names -- website names. You should still be able to connect via IP address, but who remembers IP address numbers as opposed to domain names?
With Windows 2000/XP it's possible to eliminate the static DNS server addresses by enabling 'obtain an IP address automatically' and make sure that no DNS address is entered into the DNS server box. Windows 98/ME should also do this, but there seem to be more inconsistencies and problem doing so in Windows 9x. (For example, if you change an IP address, Windows 9x wants to reboot, and after it reboots, then you have to check the address again.)
Windows 2000/XP will automatically negotiate with the ISP for this and set it correctly if the ISP enables these features. Then your neighbor will probably never have to manually update the DNS server addresses again if this works.
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Don't reinstall, isolate the problem. Then find and implement the correct solution. I can't figure out why so many people consider reinstalling a solution instead of fixing the problem.