look through your modem settings, i remember mine had answer machine options and stuff when it was installed on a Win 98 OS but doesn't seem to have any of those options on XP.
With most new modems, enabling call waiting doesn't disconnect them, they seem to hang on the connection a lot better.
My friend in the UK bought a component that plugs in between the phone line and the modem which intercepts the call waiting beeps and lets you d/c from the internet and take the call... you'd have to have a look around shops n stuff.. but i know there aren't any in new zealand