Hotspot shield is downloaded (initially) as a file named DM-238.exe (at least that's what's currently being offered). When executed, it seems to extract a temporary file (InetLoad.dll) and then it starts something called the "Anchor Free download manager". Shortly after it starts, I get "DM-238 - This program has performed an illegal operation and will be shut down". Under details: "DM-238 caused an invalid page fault in module Inetload.dll". This is on a win-98se system with Kex - if that matters.

AFAIK Hotspot Shield doesn't run on Win 98/ME with or without kernelEx.

I am using Ultrasurf from time to time ( mostly when I want to view youtube content that is blocked in my country, the UK), not sure it's encrypted though but it's decently fast usually.

Tor is another option which I believe is encrypted, there are Opera and Firefox portable bundles with integrated Tor support which cannot be easier to use. Tor is rather slow generally though.