The problem exists only with my USR Courier V.Everything 56.6 external modem. It does answer incoming calls, but early in negotiation it hangs up and Win Fax service states that it encountered "errors during fax receive".
I also have an older USR Sportster 33.6 external modem and I have no trouble receiving faxes with that one.

For testing, I've tried a different fax software (Snappy Fax) and I have a similar scenario - receive fails for the newer Courier V.Everything and succeeds for the older Sporter.

Additionally I enclose the setup of both modems:

Modem setup:

USR Courier 56k business modem (driver name: Courier V.Everything EXT PnP (V90-x2))

Standard init string sent to modem: ATS7=60S19=0L0M1&M4&K1&H1&R2&I0B0X4<cr>

Current setup:

--- ATI5 ---

USRobotics Courier V.Everything Settings...

B0 C1 E0 F1 L0 M1 Q0 V1 X4
SPEED=115200 PARITY=N WORDLEN=8
DIAL=HUNT OFF LINE TIMER

&A0 &B1 &C1 &D2 &H1 &I0 &K1 &L0 &M4 &N0
&P0 &R2 &S0 &T5 &U0 &X0 &Y1 %N6 #CID=1

S00=000 S01=000 S02=043 S03=013 S04=010 S05=008 S06=004 S07=060
S08=002 S09=006 S10=014 S11=072 S12=050 S13=000 S14=000 S15=000
S16=000 S17=000 S18=000 S19=000 S20=000 S21=010 S22=017 S23=019
S24=150 S25=005 S26=001 S27=001 S28=008 S29=020 S30=000 S31=000
S32=009 S33=000 S34=000 S35=000 S36=000 S37=000 S38=000 S39=011
S40=000 S41=000 S42=126 S43=200 S44=015 S45=000 S46=000 S47=000
S48=000 S49=000 S50=000 S51=000 S52=000 S53=000 S54=064 S55=000
S56=000 S57=000 S58=000 S59=001 S60=000 S61=010 S62=000 S63=000
S64=000 S65=000 S66=000 S67=000 S68=000 S69=000 S70=000 S71=056
S72=125 S73=121

LAST DIALLED #:

Phone Tools.

--- ATI7 ---

USRobotics Courier V.Everything Configuration Profile...

Product type CTR21 External
Product ID 99345303
Options HST,V32bis,Terbo,VFC,V34+,V90,V92
Fax Options Class 1,Class 2.0
Clock Freq 25 MHz
Flash ROM 1024k, 01-22D6
Ram 256k

Supervisor date 06/01/06
DSP date 05/24/06

Supervisor rev 2.2.09
DSP rev 2.0.34
DAA rev 0013

Serial Number 4MBSY6PG1235

USRobotics Sportster Voice (driver name: Sportster Voice 33.6 PnP)

--- AIT5 ---
USRobotics Sportster Voice 33600 Fax NVRAM Settings...

Template Y0

DIAL=TONE B0 E1 F1 M1 Q0 V1 X4
BAUD=38400 PARITY=N WORDLEN=8

&A3 &B1 &C1 &D2 &H1 &I0 &K1
&M4 &N0 &P0 &R2 &S0 &T5 &U0 &Y1

S00=000 S02=043 S03=013 S04=010 S05=008 S06=002 S07=055
S08=002 S09=006 S10=014 S11=070 S12=050 S13=000 S15=000
S19=000 S21=010 S22=017 S23=019 S25=005 S27=001 S28=008
S29=020 S30=000 S31=128 S32=002 S33=000 S34=000 S36=014
S38=000 S39=012 S40=00

Template Y1

DIAL=TONE B0 E1 F1 M1 Q0 V1 X4
BAUD=38400 PARITY=N WORDLEN=8

&A3 &B1 &C1 &D2 &H2 &I2 &K1
&M4 &N0 &P0 &R1 &S0 &T5 &U0 &Y1

S00=000 S02=043 S03=013 S04=010 S05=008 S06=002 S07=055
S08=002 S09=006 S10=014 S11=070 S12=050 S13=000 S15=000
S19=000 S21=010 S22=017 S23=019 S25=005 S27=001 S28=008
S29=020 S30=000 S31=128 S32=002 S33=000 S34=000 S36=014
S38=000 S39=012 S40=000 S41=000 S42=000

STORED PHONE #0:
#1:
#2:
#3:

--- ATI7 ---

Configuration Profile...

Product type Denmark External
Options V32bis,V.FC,V.34+
Fax Options Class 1/Class 2.0
Clock Freq 92.0Mhz
Eprom 256k
Ram 64k

EPROM date 8/21/96
DSP date 8/21/96

In any event, the modem may not be getting correct commands/initialization for fax mode. Which may be due to a bad .inf file (driver) for the modem.
Check/post your modem log.
www.modemsite.com/56k/modemlog.asp

Also see:
http://www.usr.com/support/3453/3453-command-ref/chap%204-modes%20of%20operation.htm