10.0.4 PPP dies when classic app starts

I've looked around, but can't find anyone with exactly my problem....

I connect to the internet just fine under OS X, and browse around normally. Then if I open any form of OS 9 internet application (I tried Dreamweaver and OTTool) the connection dies. What's more, I can't reestablish the connection (modem dials, but doesn't establish the connection), and when I shut down I get a kernel panic. The OS 9 applications don't connect to the internet either.

It looks like some part of TCP/IP in classic is hanging the PPP connection in OS X.

I've tried disabling ppp echo packets, but to no avail. Does anyone know what's going on?

I reformatted one of my partitions, and reinstalled OS X and OS 9 from scratch, and the problem is still there. Anyone know what I'm doing wrong? I'm running gNat if that makes any difference.

Thanks for any ideas,

Rev. A iMac (233 MHz)
OS X 10.0.4, OS 9.1
ethernet crossover cable to linux laptop