The reason you are having all the problems is because you are using USB instead of ethernet. USB was never designed for networking applications, it doesn't work properly and uses a huge amount of resource. Virgin Media and NTL before them have always said that you should not use USB.

Uninstall your current dial up connection and switch off the PC. Unplug the power lead from the VM modem and remove the USB lead. Connect the ethernet cable to modem and PC and power up your modem. Wait a couple of minutes and then switch on the PC. You should be connected to the net.