Samba wasn't meant for linux to linux networking, eventhough it is possible.
Since I realized I would never be able to set up a network between Win98 and Knoppix, I burned a second Knoppix CD and started bot machines with Knoppix.
You can setup win98 to use samba server. The problem with win98 is it wont allow you yo send unencrypted password (plain) which is needed by samba.
You need to edit registry of win98 so it can send plain password. Follow this instruction:
1) Go to Start--->run--->type regedit <enter>
2) in registry editor, go to: HKEY_LOCAL_MACHINE\System\CurrentControlSet\Servic es\VxD\VNETSETUP
3)Add the DWORD value to the Registry entry EnablePlainTextPassword (reg Dword) 1
4) reboot

Don't forget to set shared on folder you want to share on win98 pc so that you can mount that shared point.