Joystick Configuration?

Yep.  It's probably a driver incompatibility problem.  You'll need to remove
the Windows 98 joystick drivers and install the ones that came with your
sound card (or gameport adapter or whatever you're plugging your stick into)
driver diskettes or CD-ROM:

(1) Explore the disk/disc that came with your sound card (or system) and
find the drivers for the game controller on that disk/disc.  You may need to
check a README file or other documentation to find the drivers.  Be sure you
know what directory they're in before you proceed.

(2) Start up the Device Manager (right-click My Computer, then select
Properties, then the Device Manager tab) and expand the branch labeled
"Sound, Video and Game Controllers" and look for your joystick entry there.
Highlight the Game Controller entry and check on the Driver tab with "Driver
File Details" to see what drivers are listed there.  One of them you will
want to keep (MMDEVLDR.VXD) but make a note of any other files listed there
(like JOYSTICK.VXD and such).

(3) After you've made a list of the driver files, go back to Device Manager
and remove the current game controller entry by highlighting it and clicking
the Remove button.

(4) Exit to DOS mode and go into the \WINDOWS\SYSTEM directory.  Move the
files that you listed above (but not the MMDEVLDR.VXD file!) into a
temporary directory somewhere else.  You will want to save these files for a
little while just in case.  :-)

(5) Restart your computer.  It will detect the game controller and try to
install drivers for it.  Instead of using the Windows 98 CD-ROM, instead
insert the floppy disk or CD-ROM disc that has the drivers on it and click
the "Have Disk" button.  You'll need to tell Windows where the drivers are
on the disc/disk from step #1 above.

(6) Now try your controller out.  It should work just fine now and there
should be no more "Not Connected" errors.

This problem seems to happen when Win98 installs its own set of joystick
drivers that are almost but not quite compatible with the joystick
controller on your soundcard, motherboard or gameport.  If you remove and
reinstall the joystick in the Game Controllers panel it will work until you
reboot - then it shows as Not Connected again.  Removing the Win98 drivers
and installing the ones that came with the controller/soundcard/whatever
will solve this problem.