It seems that Classic applications cannot access IP services if Internet Sharing is enabled.
[robg adds: I took one for the team and fired up Classic for the first time in months ... and this appears to be true! When Internet Sharing is enabled, IE 5.1 in Classic cannot load any sites. Disable sharing, and (even without a Classic restart), IE 5.1 loads all pages fine. Anyone know a workaround?]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20030507121101739