I sometimes get this error message and I try a few things:
One is to redetect the modem if that doesn't work then close down AOL also making sure that it is no longer running in memory by opening up Windows Task Manager and looking for the waol.exe or AOLacsd.exe processes and if you find them then end the process.
Then go to programs > AOL > System Information and then Utilities > rebuild AOL adapter and this usually works for me.
p.s. I know you are running Windows 98 so these options might not be available to you, I don't know as I have never used Windows 98.