I had a similar problem under Win98SE when I did a re-format about a week ago. I didn't recieve an error like you did, it just didn't know what my modem was.
This is what I did:
Right click My Computer. Click Properties.
Click Device Manager tab.
(Now this is where I discovered that Windows did not recognise what my modem actually was. It was under a heading 'PCI Communication Device', with a yellow question mark icon.)
I right clicked the device. Choose 'properties'. Then 'Driver' and clicked 'update driver'. From here I told Windows to look in the D:/ for my modem drivers (as you should have them on disc somewhere..) and choose the correct one.
The '56k' option that you choose as a default I did also initially. But as you say, it does not work. So if the above does fix the proble you can simply single click the device in the 'Device Manager' and choose 'Remove'.
Hope this is some use to you.
PS: If you don't have a valid modem. How did you make the post on this board???!!!! :o)