Hi boofhead
As BlueEagle suggests, it sounds suspiciously like a driver issue. I am using XP Home on my laptop and can hosnestly say I am delighted with it. It came preinstalled on a Toshiba laptop so there are no compatability issues with my setup and I have never experienced any line drops or disconnection problems - I find a dramatic improvement in stability over W98SE too.
I suggest you visit the site of your modem manufacturer to see if they have a driver for XP.
In case it is of interest to anyone, I must admit, I also considered moving up to Pro as did expedite_climb, as Home does not have the Personal Web Server/IIS supplied - I wanted to develop and test a new website. After taking some advice about opening up my system to become a server, and the security issues, I decided to build the website with FP2000 on my laptop and then I opened a free hosting account with "tripod.lycos.co.uk" and uploaded it there. There are adverts, but with software to cancel them out, they don't bother me at all. It was easy to open the account and uploading was a cinch with the "Publish Web" in FP2000.
I hope you sort out your modem problem - I am sure with the right driver is the key.
Best!
HA