This is a simple fix
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Open your sound mixer from the bottom right corner, if is not there, go into your control panel and find the sounds and devices applet, and check the box that says put icon on taskbar (assuming windows XP here, by the way)
Double click the speaker icon to bring up the mixer. Where mic is in the list, check to see if it is muted, or all the way down. If 'mic' is not on the list, go to options > properties and select all the boxes, and push ok.
Now that mic is in the list, unmute it, and it will now be played back through the speakers.
Now for the explanation;
Sound cards have 2 mixers (apart from the new HD audio, like mine, with multi-stream technology)
One is playback, one is recording. (you can access the recording one by going to options > properties, and changing the drop box to recording)
Now as you can see, you can edit them independently and have 2 separate mic levels.
I believe that your new program muted the playback level, to avoid getting echo through the 'mic' you are using, but in your case, this does not matter.
Hope this helps!
Kurtis