Both "O telefone não parava de tocar" and "O telefone não pararia de tocar" can be translated using "The telephone would not stop ringing". But context is everything. Compare: "When I was famous, the telephone would not stop ringing" (use "parava") with "If I was/were famous, the telephone would not stop ringing" (use "pararia"). (The choice of "was" or "were" in the second sentence depends on how much you like the English subjunctive, both are correct in British English and just differ in formality.)
Picky, but "The telephone did not used to stop ringing" should be accepted, instead of "did not use to stop ringing." If it did stop, we would say in American English that "the telephone used to stop ringing," not "the telephone use to stop ringing." Both are in the past, hence "used" rather than "use."
The rules of grammarians do not always coincide with the rules of the English Language. The most usual constructions in English would be "never used to" or "didn't usually". In addition to the conflict of tenses, "didn't use to" is an offence against the English Ear. My advice would be, "don't use didn't use to" and I believe most English speakers don't and didn't, ever.