That often occurs when you have a Firewall running. Disable any firewalls you have. If you have Windows XP you may have the XP Firewall enabled (without knowing it) so check these instructions
You may also like to try a different hostname lookup method:ALT+O > Connect > Local Info
Make sure "on connect, always get:
" has Hostname checked, and if the server lookup method says "Server" change it to "Normal". Likewise, if it says "Normal" try changing it to "Server".
You may also try a Search
to try and find other problems that refer to this.