Short version:
PocketQuake can host network games. Attached is a patched version (ARM) and the modified source file.
Instructions: Download/copy to device/start new multiplayer/join the game from your desktop PC.
Long story:
In net_wins.c, the function WINS_CheckNewConnections(void), there is a call to the socket receive data function 'recvfrom' with the parameter MSG_PEEK (i.e. peek, but don't remove any data from the buffer).
This isn't supported on Windows CE/Mobile, and was silently failing. Incoming net data was never getting into the Quake internals.
I have replaced it with a call to ioctlsocket to read the quantity of available data instead.
Ack. It's 3am, and I've been tracing through Quake's networking internals for getting on for 5 hours - since I first sniffed the packets with Ethereal and found that the PPC wasn't making any attempt to answer client requests (Yay Ethereal for decoding the Quake protocol!) - but where was the incoming code that should answer?
Not surprisingly, the PPC hosting isn't incredibly fast (but then, this isn't the fastest PPC, so you might get better results). I haven't any way to try 2-PPCs.
Anyway, please test it.

[
ID Software: Thank you.
Dan East: Thank you.
Inventor of prinf-debugging: Thank you a lot.
]