I know you said that the mike button is on, but It sounds like the Mike is muted in the Vol control panel. Check the tray to see if Vol Control is there, if not then Start|ControlPanel|SoundsSpeach, and Audio Devices
In the upper box see Advanced Vol Control, and see if the panel has the mike muted.
Also check in the Sounds Speach, and Audio Devices panel pick Audio Tab look to see if default device is present. Also click on Audio to see if the mike is selected.
When I checked my own set up I kept plugging the mike in the wrong connector, got the manual out and found the right connector. if this is not the problem, then a re-install of the sound card drivers maybe all that is needed. You may have to go through your add/remove panel to remove the old drivers.
Daughter's SIL is probably blonde (can't see through the phone) and has run into a problem with Sound Recorder in XP. The sound card is installed correctly and works fine; however, hooking up a microphone and making the changes in Sound Properties/Options to include the microphone in recorder list doesn't let Sound Recorder to work. Here's what's happening.
First, if we TEST the microphone and sound card, she can talk into the mike and it comes through the speakers just fine. BUT...opening Sound Recorder gives the toolbar and the slider, but NO buttons on the bottom to press for Record, Stop, Back, Forward.
How do I get the buttons to show up? Once she closes the TEST program, the mike no longer works through the speakers either, and no 'crackles' come forth if she toggles the mike jack in the sound card. There is an off/on button on the mike but she swears it's turned to the ON position, and it would have had to be in order for the TEST to work.
After looking at the MSKB, I can see that possibly the Sound Recorder program/file is corrupt and it suggests reinstalling the SAPI component. Where would I find that in order to reinstall? I had her remove the sound card from Device Mgr and it got reinstalled immediately after a reboot, but that didn't put the SAPI file back correctly. Same problem with having no buttons showing on the SR window.