The problem is that LocalTalk can't "do" tcp/ip (the "internet" protocol) - it can only handle AppleTalk and that's it.
MacTCP allows you to work around this limitation by wrapping ("encapsulating") tcp/ip inside LocalTalk packets. This is called "MacIP" (http://en.wikipedia.org/wiki/MacIP). For MacIP to work, you also need something on your ethernet network that understands both AppleTalk and tcp/ip and can unwrap the tcp/ip packets and put them out on the Internet.
This is ideally performed by a LocalTalk to Ethernet router (hard to find these days). There are also software routers and MacIP gateways, like the old "Apple Internet Router" that you can run on a second, ethernet capable Mac to do this - but you don't really want to be running a second Mac just to hook a Mac Plus up to the 'net.
[EDIT] Your domain setup in MacTCP looks a bit weird too. Under the "Domain Name Server" column, the "Domain" text boxes have your domain name ("68kmla.org" or whatever) on the left and the DNS server IP on the right. I'm pretty rusty on this stuff now, but I think it was conventional to have at least one entry with the domain name "." (just a period) to represent all domains other than your own.
MacTCP allows you to work around this limitation by wrapping ("encapsulating") tcp/ip inside LocalTalk packets. This is called "MacIP" (http://en.wikipedia.org/wiki/MacIP). For MacIP to work, you also need something on your ethernet network that understands both AppleTalk and tcp/ip and can unwrap the tcp/ip packets and put them out on the Internet.
This is ideally performed by a LocalTalk to Ethernet router (hard to find these days). There are also software routers and MacIP gateways, like the old "Apple Internet Router" that you can run on a second, ethernet capable Mac to do this - but you don't really want to be running a second Mac just to hook a Mac Plus up to the 'net.
[EDIT] Your domain setup in MacTCP looks a bit weird too. Under the "Domain Name Server" column, the "Domain" text boxes have your domain name ("68kmla.org" or whatever) on the left and the DNS server IP on the right. I'm pretty rusty on this stuff now, but I think it was conventional to have at least one entry with the domain name "." (just a period) to represent all domains other than your own.