The next place I'd look would be:

Start - Settings - ControlPanel
Go to System
Select DeviceManager
Look in "Sound Video and Game Controllers"

Make sure you have everything working there.

Occasionally, the PNP routines, that are supposed to find all your devices and install them when you reboot, will take a wild trip and fail to load - or will misidentify a piece of hardware, like a soundcard. (If you haven't done it recently, sometimes a shutdown and restart works wonders. A full shutdown sometimes does a more thorough job of renegotiation the PNP than a "restart computer" too.)

Next go back to Control Panel and look at "Multimedia" and make sure that you have the right equipment (mainly drivers) selected.

Most of the things you can change are on "rolldowns" that will show what the machine thinks is available. Make a note of what is set, so you can go back, and then try changing ONE THING AT A TIME. If there is no improvement, reset the thing you changed BEFORE you change something else.

It sounds like your audio driver has been switched to an MP3 or WAV only. Normal setting (depending on equipment) for the audio tab in multimedia is "use any available," but this can get changed inadvertently, or may be set differently if you have a good (or add-on) sound card. Of course, everything depends on the things unique to your system.

John