Yes, it can work. I played NFS III and UT quite a few times via dialup. It does lag a little and the 'UT server' had better be on a fast machine as when the host player's FPS drops low, the client player will see more lag. In some cases, it would be better to play together on an Internet server that has a good ping to both of you.
Its been a long time since I've done it but as I recall it was pretty basic and straight forward to set up. One person turns on his Dial UP Server (may have to add the windows component) the other person creates a new dial up with the Dial Up server's phone number.
Once you're connected, either one of you can host a game. The other player just needs to know and enter your IP address of the game host machine.
Use 'winipcfg.exe' to display you modem's IP address (you have to be connected to each other). Ignore the NIC and any other IP addresses you may see and need to scroll past.
You may also want to use ping -t xxx.xxx.xxx.xxx (replace the xxx's with the other comps ip address assigned to the modem card), to confirm you're using the right address and to see what the lag/ping time is.
BTW, I tried mixing dialup with lan and could never get it to work. 2 people on a LAN with 1 person dialing, it in would refuse to allow all people to see the games. Although in AOE, it made it as far as joining a game, just never launching.