The game requires a dedicated server. And if you are attempting to run both a client and server on the same machine, it has to be a powerful machine and one that is running either WIN2K or WINXP. This is all covered in the FAQ.
If the client is disconnecting, it is because of scheduling due to the strain on the machine attempting to run both a client/server.
You could try running the console server mode. But since that version is probably buggy (since it wasn't fully fleshed out), you might have other problems.