First, make sure the modem is plugged into the phone line correctly -- Telco to the wall and the optional Phone plugged into a telephone. Can you open a Terminal Window and send any commands to the modem, such as ATZ? Unless com 2 is unavailable, try to switch the modem to that. Although XP is supposed to have most drivers for devices, it may not hurt to download and install the latest drivers from the mfr site. Sometimes, although Windows acknowledges the physical presence of a device, it may be experiencing conflicts. Check for any compatibility updates for Windows as well. If not already done, perform all Windows Updates. Try physically removing the device after shutting down the system, reboot to make sure Windows notices the hardware change, then shut down again and reinstall it. Try a different slot if avaiable. Also note that some devices just are not compatible with XP. This is one of the typical issues with XP Home, unfortunately. If you can, try installing XP Pro.
If the PC itself is very old, it may be that it is not XP ready. Depending on proc speed, RAM and BIOS revision, there may be other compatibility issues as well that have not made themselves know at this time. If possible, flash upgrade the BIOS, which can be found on most motherboard mfr website.