I could create LAN or Internet game and having guest join my lobby for a while but since some time when I press Host New the game freezes for a couple of seconds and then returns to previous state, nothing happens.

I managed to solve this issue by copying files from C:\Windows\WinSxS\amd64_microsoft-windows-d..directplay8-payload_31bf3856ad364e35_10.0.19041.1_none_b970f5eb63 42eadb to game directory. These are DirectPlay files. However, only amd64 version works, files from x86 folder does not work. I am guessing that is because W10 I am running the game on is 64 bit and game being 32 bit does not matter. Now I can Host multiplayer games again.

Does the game really require the files in it's own directory to work?
You can just install DirectPlay from the Windows Features panel.

I had the feature enabled already.