ethernet: can't ping localhost or send responses..

["David Gudlaugsson" <Davinci_@xxxxxxxxxxxxx>]

I've got a linux box with 3com (3c509) card in it connected to a hub
with another Win98 machine attached. I've got eth0 and lo 
configured
and up.
I can ping to the win98 machine from the linux box but I can't ping
the box from win98 or ping localhost from the linux box. I can see
that the traffic is going through both boxes when I ping from the
win98 machine but it gets lost. It seems like the linux box doesn't
know how to respond to requests from both itself and other network
devices.
Any ideas why it can send out (and receive from network devices) 
but
not respond?
Thx
David

p.s. Someone said I had to have inetd running.. true?