Thanks to WinInfo subscriber Daniel Docekal for the tip: The new Exchange 5.0 messaging client and Outlook97 from Office 97 are making Windows 95 support for faxing useless. When Exchange Server is installed and used as the message store (in other words, the server rather than the Personal Folder on the user’s desktop stores user messages), the MS Fax Service (and the Internet Mail service) stops working.

Microsoft confirmed that this is the known and expected behavior. Both services—MS Fax and Internet Mail—will work only when the user has a local message repository (i.e. a Personal Folder).

Hopefully, Microsoft will fix this in a future update