Although it appears that there is no longer a PlayThrough option in the Mac OS 8.1 version of Monitors & Sound, you can work-around this by getting Neal Hickox's Sound Input Strip. It is a Control Strip module that allows you to toggle PlayThrough. (Thanks, Bob Van Burkleo and Mike Hulsey.)
According to reader reports, turning off PlayThrough can help avoid getting audio feedback noise from speakers when using the microphone. Otherwise, you will have to turn down the volume when using the microphone. Changing the Sound Input to something other than Microphone should also stop the feedback sound. This problem may also be the cause of the "weird sound at startup.' Some readers report that zapping the PRAM will eliminate this symptom.