It could be a corrupt TCP/IP Stack - I've seen this problem a couple of times, the symptoms being apparent successful connection to the ISP, but with out being able to use email, use messenger, browse the web etc.
To reinstall TCP/IP:
For Windows XP, open a command prompt (Start->Programs->Accessories->Command Prompt) and type "netsh int ip reset c:\resetlog.txt" (More detail - Microsoft Knowledge Base Article 299357)
For Windows 95/98, follow the following instructions http://www.peakpeak.com/support/win95/dun/tcpip.htm - please note you will probably need to have your original Windows 95/98 Setup disk.
Not sure if it is any different for Windows ME & Windows 2000... Hope this helps. :-)
Phil Hull
October 2003