IF you are in fact only needing Xon/Xoff, then you don't need the hardware flow control or loopback pins at all. However, I understood your post to say that you were using software flow control but did not have connectivity (i.e. something on the hardware side might be holding you up). RS-232 must be the worst implemented 'standard' i've seen, i've seen it everything from data and ground to 15 or more wires required for various functions. Everyone implements the portion they need, hardly a standard.
One manufacturer ASSURED me that they do NOT use hardware flow control. I spent an hour on the phone with him hooked to the PBX waiting for data to come out, changing settings, making phone calls. I finally grabbed my breakout box and tried changing state of one of the hardware pins and Shizzle! it worked. Apparently they don't implement hardware flow control but need the hardware flow control pin in a 'ready' state before they send any data.
Good Luck!
Daron J. Wilson, RCDD
Solving 'Real World' problems