So, went out and purchased a dedicated PCI USB card 15 bucks at Tiger Direct. Did my research to make sure it supported High Speed USB and was native to XP - no additional drivers to install.
This matched the dongle's max speed 480Mbps. Sure enough it worked, no more cutting out. The conversations are clear on both ends. For the real test, dialed up a few automated answer lines and was recognized every time when I spoke an option.
Also called the wife for her feedback and she said I was clear as a bell but sounded a little distant like on a speaker phone. (no biggie)
The whole thing cost only 40 dollars new dongle and PCI/USB card.
I decided to post back, in case anyone else was doing a hands free install and ran into the same issue. Just need to tweak the volume a bit.