Sounds familiar. I'm running a few G3's, a G4, assorted PPC 's, and even a few 68K macs on occasion. Setting up the LAN for more than one to use a p2p client is tricky. I had to dump the software router and get a LinkSys dedicated router to help ease the problem you describe.

If your router (what model?) acts as a firewall, you can turn off the OSX built-in firewall.

As I said, the lousy solution is to disable ultrapeer capabilities. This cuts down the number of connections, and still allows you to search, download and upload quite well, but deprives the network of your potential to be a significant crossroad on the network. I needed to map each machine to a different port (and open up those ports) to cut down the conflicts.

Did I miss what version of LW you are using ? You might want to try Jens-Uwe Mager's build of LW3Pro and see if it fixes some of the OSX specific problems for you
http://baghira.han.de/~jum/