Ric,
Try another PC and that will tell you which end is bad. However, from what you are saying, it sounds like the link is erroring (bit errors). Try calling it with the phone and listen to the tones when it answers...do they sound clear? If not, try from a different phone line (at your friends place) and see how it sounds. If it still sounds bad then you may have a problem with your line at the wash. Check your wiring and call the phone company if all looks good. However I must say that it has to be really bad as the low speed protocols used in the connection are very robust. BTW, you are not using a Voip line, correct?
The other thing you can do is dial in with hyperterminal and once the WSII modem answers, type +++ That will break the modem out of communications mode and into command mode. The type ATI1 and return, then ATI2 and return and so on until you get the connection info. That will tell you what protocol, speed, compression etc used. That will give you some insight on what the connection is like. Cut and past that and post it here...I'll interpret it for you.
Big