Integrating with Outlook should have no bearing on this.
Reception/transmission errors are very common with Windows XP Fax.
Unfortunately, Windows XP Fax has proven to be incompatible with many common
modems and drivers, particularly older ones, even if the manufacturers claim
they are "compatible" with Windows XP. Modem incompatibility is not apparent
during installation or the initial setup. It only becomes apparent when you
try to send or receive a fax. The Fax Service will dial or will answer an
incoming fax but then fail with any of a number of unhelpful error messages
such as "Line is busy," "There is no answer," or "Reception error." Often
there will be nothing in Event Viewer to give a clue as to where the problem
might lie, but you should check there first.
These errors have been nearly impossible to track down. To do so requires
enabling both PSS and debug logging of fax transmissions, both of which
require fairly extensive registry changes. For the time being, the best
advice is to attempt to use XP Fax only if you have a modem that is listed
on the Windows XP Hardware Compatibility List and using the latest drivers.