iwrate,
Given that you're using Paradox 5.0 tables, you should probably forge the ADO in lieu of simple ODBC. The most recent version of MDAC requires 32-bit BDE to be installed.
Remember that Paradox 5.0 and BDE 2.5x are 16-bit applications. They're not equipped to understand the ADO interface. That requires more recent versions of the BDE (5.1.1 is the latest).
The older ODBC drivers provided with MS Office are less than perfect, but they do support Paradox 5.0 tables. Note that they do *not* support the Paradox 7 table format, meaning you cannot use unique or descending secondary indexes with those older drivers.
If you wish to use ADO, upgrading to Paradox 9 may be useful as that a) installs a recent version of BDE and b) includes a recent version of Merant's (aka InterSolv's) ODBC driver for Paradox, which is vastly superior to MS's implementation. (IMHO, of course YMMV ;-))
As far as upgrading to MDAC 2.6, I can't provide a direct opinion. I've heard that it can help, but I've also heard that it can cause problems. Check out MS's KnowledgeBase for related articles and see if there's something relevant.
The cheapest solution is the try the ODBC approach. If that works for you, run with it. If it doesn't, then investigate the Paradox upgrade.
Hope this helps...
-- Lance