I'm not too sure that this is relevant to you but I think I've come across the problem before with this type of modem. When you say that the machine tells you that the modem isn't turned on - do you actually mean that it says it's not responding?
This tends to occur with this type of modem because it uses your computer to generate the signals (HSP - stands for host signal processor) - hence since your processor is now busier running windows 98 it is unable to respond to it's modem tasks.
YOu may be able to get a more upto date driver - see
http://808hi.com/56k/trouble.htm
but otherwise I think you'll need a proper modem.
Good luck
Steven