I can ping the internal and external ip addresses from the win98 box. Look at how to set up dnscache, it's very friendly on resources and resolves issues with security that BIND can't quite handle. If dnscache isn't enough look into the tinydns program.
All info is under the Frequently asked questions header.
They probably have a huge set of subnets, if they have many customers, so it's the way they have set their networks up on their end. Pete Your internal interface, 192.168.1.1, should not be listed in the routing table, just delete it, otherwise it looks quite good. The routing table entries are attached to your network interfaces, eth0 and eth1, which will guide the packets on their way through your machine, both going in and going out, so that they will know where they will be going to, otherwise they won't find any reasonable place to travel to, thereby causing errors and giving you a hard time on not knowing what is wrong. It's just like traveling by car, you need a map watching for intersections on the way in order for you to find your way around.