Cannot Get AT&T to See Modem

I am trying to get an Inspiron to connect to AT&T via internal modem.

The modem is working -
1) no bangs in the device manager (for the modem or any device - clean!)
2) ran the Dell Diagnostics and it responded to all the AT commands
3) all the drivers seems to be installed with no problems - most if not all are signed

I just cannot get the OS to recognize the modem as a device that can be used for Internet connections.

The wireless works - the OS was updated from SP1 to SP2 via the wireless.
The NIC seems to work, it knows that the Ethernet cable is not connected and is available for networking. So, I know that network services are working properly. But my friend does not have cable service and likes to get her computer working again via modem.

OS Summary: Windows XP Home, SP2

Quick summary of problem: OS and/or AT&T connection software does not see modem, which is functioning.
1) I have moved the modem from the default com 3 port to com 1 (via Windows) - same problem.
2) I have removed the modem, and after restart, it is discovered and re-installed without problems.
3) I have installed the latest driver from Dell, no improvements.

What are we missing for the OS to present the modem so it could be configured?

Thanks