What path are hardware drivers located in? like the drivers for modems, video, sound etc...

/lib/modules/2.4.17/

for 2.4.17 kernel (obviously)

well... lets say... youre wanting to buy maybe a new modem and want to see which drivers are supported ... how can you tell out of the list of /lib/modules/2.4.8-26mdk/kernel/drivers which one would be the right one to see if the new hardware is supported?

For many distros, the easiest way to verify new hardware support is to check the Hardware Compatibilty List on the comparies website. It lists the device that are supported in different versions of their product, and usually driver information as well. Otherwise you'll have to find out, from the hardware manufacturer or elsewhere, which drivers are used by the particular device and match against you kernel's modules.

Remember that just because a certain module isn't natively supported doesn't mean that you can't compile it and run it as a loadable external module.