Disappointed that Droid cannot do this. For those interested, below is the solution I adopted.
Goal = Eliminate the Voip phone line in my house that cost $20/mo and was used exclusively for faxing (send and receiving). On average it would be used 2 times / month (only a few pages). Preference was to find a free replacement.
Solution:
a) For outgoing faxes, Faxzero (Google it) provides a free service. It allows 2 outgoing free faxes a day (no more than 3 pages per fax). It does put a small ad advertising itself on the bottom of the cover page. This works perfect for me.
b) For incoming faxes, signed up for K7 Unified messaging service (Google it). It provides me a free fax number and forwards all received faxes to my e-mail with a PDF attached (cannot exceed 2 meg per fax). This limitation could be an issue for me. We shall see. It also requires that I get at least one fax per month else my account will be canceled (this definitely is an issue for me). To get around this issue, I signed up for a weekly fax from U. of Maryland med school. If they stop their service, I could have a problem. If any of you know of another fax broadcast I can sign up for, I would appreciate it.
c.) I also signed up for a free e-fax account which allows me to receive 20 pages of faxes per month (actually a rolling 30 day period) for free as well. Bad thing about efax is that the faxes do not come in PDF format when I receive them. They require (free) proprietary software to be downloaded on my PC to read it. Thus I cannot read them with Droid or any other PC I may be on unless I download the software. No PDAs are compatible.
So this is not the cleanest solution and I wish my Droid could do this instead, but I think it will work for me. Bye bye Vonage.
BTW, why the heck does anyone fax anymore? The only reason I do it is b/c my wife has some clients from the stone ages that demand she send/receive docs via fax. Customer is always right.