Not sure if this will help you but I had a similar problem except that
the printer was connected to the XP Home machine. The W98 PC would share
files back and forth but the printer would not work.
After much trial and error testing I determined that the Windows 98
machine needed the XP Home PC set up with spooling of the printer (I had
it setup as "print directly to printer."
Immediately after changing that setting, I was able to install the
printer driver on the W98 PC and print to the network printer.
Now, one more thing, I also had a Laptop (XP Home) connected via
wireless card that would print to the network printer as it was before,
that is print directly to printer. Since that one worked I saw no reason
to change that setting.
Some of my Googleing turned up folks with spooler errors so I decided to
change my desktop (XP Home & connected to the printer) to spool print
All three PCs work fine and the two not connected to the printer work
fine. It appears that W98 NEEDED spooling on the physically connected PC
while the LT using XP Home works either way.
Hope this helps, Fred