Samba is merely participating in the WORKGROUP domain.
When the Win98 machine is logged on as the equivalent
user in the Samba smbpasswd file, smtp e-mail through
Outlook prompts for a username/password and does not
connect to the netwrk mail server.

This seems to me to be a newbie question, but alas, I
cannot find an article covering that topic. Any
comments on this are welcome. 

What does Outlook smtp e-mail have to do with a local
file sharing setup anyway?

Befuddled.

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