I am thinking, it might be a good idea for you to get on the newest drivers for your modem.
for when ME/98 I would recommend you get PPPoA v1.6.3
since you are on USB.
http://www.fastaccess.drivers.bellsouth.net/
Also with WIN ME, check your system resources, since you know it is something in the computer, check out start, settings, control panel, System, Preformance, check your Percent of system resources, they should be about 80 percent or HIGHER.
If the resources get low, it can cause problems like those you decribe.