Asterisk does work with POTS. There are some modems which work with it (Conexant modems, I believe) however, I would most definitely not even attempt it.
Asterisk bridges with TDM/POTS-based service via a driver suite called DAHDI (previously known as zaptel). Your best bet is to use a TDM card made by Sangoma. Digium cards are also pretty decent. They're not cheap. There are tons of knock-off X100 cards and the like, but there is no substitute for the real thing.
Take it from someone who sells Asterisk-based phone systems: the aggravation caused by using substandard parts is not worth the cost savings.
The cheapest POTS connectivity is probably going to come from Sangoma's 2-port USB FXO device:
http://www.voiplink.com/Sangom...B_p/sangoma-usbfxo.htm . FXO is the interface you will use when connecting to a provider network. FXS is what will be used when connecting an analog phone to your system.
If you intend on connecting analog phones to your system, you should probably invest in an actual 4-port card. The Sangoma A200 is great and can be configured with 2 FXO and 2 FXS ports. Alternatively, you could use the 2 port USB FXO interface and get a Linksys PAP2T (2 port FXS media gateway) for FXS connectivity. For home use, echo cancellation probably isn't worth the investment. With only a single active call, software echo cancellation should be sufficient.
I also recommend not using a GUI at first. You should learn the basics of Asterisk config so that you know what will happen when you do certain things in the GUI. As far as GUIs go, FreePBX isn't terrible. For prepackaged Asterisk installations, Elastix is pretty decent.
So, to recap, don't try with a modem. Get the 2 port USB Sangoma device or a real PSTN card.