I've used lots of modems, and I can't reccomend external modems enough. They're all hardware based, don't need any drivers, don't need to operate on COM 3 or 4 (which can cause interrupt conflicts). Diagnostic lights are quite handy and the ability to kill the power on the modem without resetting your computer is also nice if something gets screwed up. Like these guys have mentioned before, the USR Courier is the Cadillac of modems. It's also available as an internal model.
If you're looking for something less expensive, make sure that you don't end up with a controllerless modem too. Controllerless modems are somewhere between software and hardware modems because they don't rely completely on software, but do rely more on your CPU.
Good luck modem hunting!