XP comes with a fax program. You may need to set it up (don't remember whether I did or not but Start -> Programs -> Accessories -> Communications anyway), but after that, you just print (from whatever program you're in or from the desktop or folder the document is in) to the fax instead of the printer, it should be detecting the modem on it's own.
And yep, you need a filter. If you didn't get spares from the phone company and you gotta, you just take the one off the phone for the couple minutes.