Code 2 seems to mean it can't load the driver.
https://www.google.com/search?q=ntkern.vxd+98+modemation shows it was a quite common problem when people still used Windows 98 SE. Maybe one of the hits points to a solution.,
It's not clear from your post what worked before.
I am trying to install a modem on my Windows 98 SE laptop and it installs fine but I can't use it so I press the Windows Key + Pause Break and it then I press the Device Manager tab, I see the modem not under 'Modem' so I look under USB and it's there with a yellow exclamation mark on the USB logo. I click properties for the device and it says an error about NTKERN.VXD (Code 2), I have installed and uninstalled this many times and it still comes up with that error.
P.S. This has worked before on this laptop but now it isn't!