Someone e-mailed a version of msnetupd.exe and when I ran it, I still had the same problem. Turns out it had the same file dates (8/96) as the files I had on my win95 box. The only msnet32.dll file I had that ran INGROUPS correctly was the Win98 version. Here's my code for what I do to check/update the file:

;==================================================
;+++++++++++++++++++
; Update MSNET32.DLL
;+++++++++++++++++++

;Will update the MSNET32.dll file on a Win95 system IF the file is outdated.

IF @Inwin = 1 goto startkix
ELSE goto chkmsnet

;**********
:chkmsnet
;**********
$msnet = "\\server\shared\kixfiles\kix\msnet32.dll"
$msnetloc = "%windir%\system\msnet32.dll"
$rc = COMPAREFILETIMES($msnet,$msnetloc)

IF $rc = 1 OR $rc = -3

;Fixes problem if a Win9x client does not reboot before logging in a 2nd time.
IF EXIST ("c:\dpscs\autoexec.kix")
COPY "c:\dpscs\autoexec.kix" "c:\dpscs\autoexec.k2"
COPY "c:\dpscs\autoexec.kix" "c:\autoexec.bat"
ENDIF

COPY "\\server\shared\kixfiles\kix\msnet32.dll" "c:\dpscs\"
COPY "c:\autoexec.bat" "c:\autoexec.kix"
COPY "c:\autoexec.kix" "c:\dpscs\"
DEL "c:\autoexec.bat"
COPY "\\server\shared\kixfiles\reboot\autoexec.bat" "c:\"
COPY "\\server\shared\kixfiles\reboot\reboot.bat" "c:\dpscs\"
COPY "\\server\shared\kixfiles\reboot\reboot.asm" "c:\dpscs\"
COPY "\\server\shared\kixfiles\reboot\reboot.com" "c:\dpscs\"
COPY "\\server\shared\kixfiles\reboot\reboot.doc" "c:\dpscs\"
ENDIF

The autoexec.bat & reboot.bat are used to boot the Win95 system, replace %windir%\system\msnet32.dll with the Win98 version, and reboot the system.