using landline phone when I convert to digital?

Your phone does have to be plugged into the gateway.

I solved this issue by using a phone system with one 'main' handset and 3 cordless handsets like this one  I have handsets all over the house and the only thing they need is an electrical outlet to charge them.

I removed my old wallphone (I thought I was the last to have a wallphone) and have one of the cordless handsets on the counter.  I can't imagine being tethered to a wallphone anymore.

I also have a fax machine. Where will it plug in? Are there 2 outlets on the back of the gateway?

Sorry, I don't know anything about using a fax machine.  I don't know why you can't use a splitter for that.

I believe there are two phone outlets on the gateway but I thought it was for two separate phone lines (numbers) but I could be wrong.

@spoom2   I'm sure you know more about the logistics of VOIP than I do.

I'm just trying to get this all figured out before the time to switch over. I AT&T person I spoke with told me it would be "no problem to use all of my existing hard wired phones". Now it seems that only a phone that is next to the gateway will work. I'm not happy with the AT&T person.

You can use your existing wired phones by feeding them through the gateway, it will take a little rewiring I don't know if the tech will do it for you or not, if not there's low voltage wiring companies out there that will.  Or you can go the route suggested by @skeeterintexas with the cordless system, for that you'd wire it per your fax machines instructions, basically you go from the phone jack on the modem/gateway to the input/line of the fax and plug your cordless base unit into the output/phone jack on the fax, which is the correct way to have a phone and fax working together. 

The ATT person told me I didn't need a tech to come out. He said a tech coming out would be an extra charge. This isn't turning out like he explained it at all. I may need to back out of this deal and keep my old copper wired phones.

It's not hard to back feed to the existing wiring for someone who knows what they're doing.  I don't know what it cost to get a tech out, but copper lines are rapidly becoming a thing of the past.  If you can check with a local low voltage tech it would probably be cheaper than using an AT&T tech.  Keeping what you have is also an option for now. 

Can you explain how to do it? My main phone line comes into the jack near my gateway. Will I route that line into a new jack. Plug that new jack into the gateway "IN" jack. From the gateway "Phone" jack, plug it into my jack that feed the rest of the house?

I'll try.  From your post it sounds like you already have the gateway installed.  You currently probably have one jack that the cord goes from the jack to the gateway, that is the feed from AT&T to the gateway, that stays as is. Now comes the rewiring part take the jack apart so you can see what color wires are feeding the gateway, more than likely the white blue pair of wires if  you have 4 pair cable.  You'll need a two port jack, put your current feed on one and on the other jack take another unused pair, white orange, white green or white brown and connect it to the white blue of the second jack, plug your gateway's phone jack into it, if you want a phone at the gateway use a splitter so you have two feeds.  Now you need to go to the NID and connect the pair you selected to the old lines going to your jacks, you'll need to determine which one feeds your gateway, which can be done by cutting them one at a time than checking your modem to see if all the lights are correct.  Once you've determined this reconnect the modem to the feed from AT&T and connect the pair you picked to the remaining wires you disconnected, now all your jacks will work as they did before.  

 It all sounds so easy, kind of like heart surgery. If you know what you are doing, it's all easy. I think I understand what you are saying. the worse that can happen is I do not have any phones that work. In that case, I'll just post "HELP!" lol

Thank you very much for your input!