Rhys,
I agree with Del. You need to first get a good understanding of how TCP/IP works in general (hardware [NICs, hubs, routers, cables], IP adresses, network masks, routing, address spaces, private vs. public networks, DHCP servers). Then you need to understand how Windows deals with TCP/IP. Finally you need to learn some Linux/Unix basics to understand what tools you have to troubleshoot when things don't work as desired.
Judging from your Windows config printout above, the Windows 98 machine did not find a DHCP server anywhere, so it used an "autoconfigured" IP address in the 169.254.x.x space (not really an address space officially designated for private networks, but somehow MS chose this, I guess)
It looks like the SME server has found it's NIC and is providing DHCP server functionality on it.
I suspect that you have physical connectivity problems in the network. Make sure you're not using the "uplink" port of the hub, if it has one. Use only straight cables, not crossover, for the connections to the hub.
Also, I would advise not to use BNC and 10BaseT (or 100BaseT) (your hub network) at the same time, if you're doing that. Certainly you should not connect the same NIC (even if it has both BNC and RJ45 plugs) to both types of network at the same time.
My advice, again, is to pause, take a deep breath, and then go learn, learn, learn before attempting this again. Alternatively you could always find someone in your circles with more experience and ask them to help and teach you as they go along. May even be worth paying for, if you're looking at this in a professional setting.