First a bit of elementary (self-taught) modemics.
Proper modems have two main pieces of hardware inside
A data-pump and a controller
Your PC has little extra work to do
Expensive, usually external, reliable
WinModems only have a data-pump
Your PC has to do the control processing in the background
Cheaper, but extra work for the PC/CPU/bus
Becoming the norm. Can be OK in matched system.
Usually internal, can be external.
Soft WinModems have nothing much inside
Your PC has to imitate the work of the data-pump
and the controller all in software. A lot of extra work
for the CPU/bus. A few about. Very cheap.
Usually internal.
I got a USB external modem when I upgraded a year or so ago. Made by Dynalink (I think Australian...) it was built around the Conexant (ex Rockwell) 1456VQE-R3 INT1 chipset and internally called itself a "Conexant HCF V.90/56K Data,Fax,RTAD USB Modem". This is a Winmodem, with the controller implemented in software as part of the driver package. Very many companies bought the chipset and driver, tweaked the driver a bit, packaged it, badged it and sold it as "their" modem.
I had endless trouble with it, principally manifested by dropping the line all the time, and this led me to investigate the problem further. Very many other people have had problems with these modems - some have spent months trying to find solutions - few have succeeded. There seem to be two issues.
1) The drivers (as for all Winmodems) are complex and very tricky to write - principally because they are software pretending to be hardware yet must react in real-time. It doesn't seem that Conexant/Rockwell did such a good job here - and no-one else wrote alternative drivers (why should they?). For a long time C/R refused to acknowlege the problem, referring complaints to the OEMs who actually packaged and sold the components (like Dynalink). Dynalink (or whoever) in their turn, maintained that the problem was C/R's and referred unhappy clients to them... Eventually C/R reluctantly released an unsupported set of "generic" drivers for these chipsets which did little to fix the problem. Dynalink (and others) quietly dropped the chipset.
2) Getting a piece of software to successfully pretend that it is hardware in an exquisitely timing sensitive environment like a modem is very hard. Not only does the software have to be very carefully written, but the speed of the CPU, the bus, memory and the interrupts have to be up to servicing the modem impeccably ALL THE TIME. There is very little margin for error - just one small software buffer overrun can cause the whole incoming packet to be lost and re-requested leading to poor throughput. The carrier is generated in software, so if the CPU gets a bit busy (running other software) the carrier will be lost and the modem will "hang-up". In a "real" modem you can fix this sort of problem by telling the modem to wait longer to hang up when it loses the carrier (ATS10=80) - this doesn't work with a modem implemented wholly or partially in software. There are many other practical difficulties/problems.
Nevertheless, todays CPUs, memory and busses are so fast that it is not unreasonable to implement a modem wholly or partially in software (and much cheaper) though getting close to the reliability of a pure hardware design is more difficult. Winmodems are becoming much commoner (almost the norm).
I never ever got my darn thing to work reliably, despite trying innumerable tricks and patches. I expected it's bad habits to worsen when I tried it in my secondary P2/266 rather than the P3/800 - but there was little change. Overall it seems OK for reading email when the PCs have nothing much else running.
I went back to my USRobotics full hardware modem and can stay on line for days with never a glitch. So it's hardware external for me. As you will now appreciate, external these days does no necessarily mean a full hardware implementation and it is likely that both your modems (internal and external) are actually Winmodems and will behave very similarly. The driver software for your internal modem is likely to be better matched to your PC, so my guess is that you were indeed "suckered" into buying the external modem.