boofhead,
I installed XP Home Edition on my old laptop and then the internal modem wouldn't work so I bought a Blaster external USB modem very cheaply and it worked perfectly.
My new (Toshiba) laptop came with XP HE pre-installed and I've had no problems with internet connections at all, so I don't think it's XP HE. Have you downloaded all the updates from the Microsoft website? There are a few computer mags out at the moment which have a lot of the latest updates and fixes on their free CDs.