Hi Flashpoint, I feel sorry for your modem troubles, and I have had exactly the same problem for the last week or so.
I can connect to my ISP quite normally, but then no data transfers take place, and consequently no pages open up in IE6.
All my ping tests have failed also, and by reinstalling Win98SE it only made the situation worse. The techs at my ISP checked everything out that they could, and said it had nothing to do with their connections.
The only reason I can send this post is because I reactivated my firewall, and then told it to allow all traffic. I am still not sure if I will be able to connect again next time I try!
If you have found any ways of fixing this problem, please let me know.
My next step would probably to start spending money on upgrading to XP, but I dont know if even this will fix it.