Server hangs when link is down

I am running a server with SuSE 6.2, kernel 2.2.10. The server is connected through a leased 64kbps data circuit. The circuit was down yesterday due to problems with the telephone company. But when the link to wan went down the server is virtually hung. It allowed people who are already logged in to work, but many commands didn't work, such as ps. I could not su to see what the problem is. Why does this happen? I suspect the problem could be due to DNS lookups. But the server in question runs a local DNS, so at least local logins should be allowed. It was not allowing logins even from the console. Any clues would be welcome! Thanks in advance! Nagarjuna