Proxus,
Try this.
Uninstall the Nokia Data Suite completely using remove programs.
Re-boot
Go to control panel, and then infrared. Enable infrared on phone and laptop.
They should be seeing each other.
Now install Nokia Data Suite. Is the infrared option still greyed out?
FWyg.
Just for information: The 7110 isn't a modem, and doesn't as such have a modem. The software provides a virtual modem. The phone just "carries" the data connection.