Yes, it is possible to connect the emulator to internet by using an analog modem. However, it is strongly recommended to use a mobile phone when connecting, since this shows you the right user experience. Analog modem also does not give you access to GSM-specific functionalities.
Basically, setting up an analog modem configuration can be done pretty much in a similar way to the cellular modem connection. However, when setting analog modems you have to change TSYName (in Modem Information) from GSMBSC to HAYES and create a new Location Information that meets the operating environment. Finally, you have to create Internet settings which take the new modem and location into use.