[top-posting corrected]
>> 1) What sort of fax device are you trying to use?
>
> 1) A modem
:-)
>> 2) To which physical machine is it connected?
> 2) It is installed in my main computer on which VM is installed -
OK. Also, to avoid any future confusion, the application in question here is
Virtual PC, sometimes abbreviated to VPC - virtual machines, sometimes
abbreviated to VM, is what VPC creates...
> the computer is not networked.
Ah...
>> 3) How is it connected?
> 3) Modem is on the motherboard
In which case, I fear that you're almost certainly out of luck.
Does the fax modem create a pseudo COM port e.g. COM3 or COM4...? If so,
your only course of action would be to map one of the COM ports in the VM to
the fax modem's pseudo COM port on the host and use fax software which
allows you to send directly to a COM port rather than to an installed modem,
if such software even exists...

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Mark Rae
ASP.NET MVP
http://www.markrae.net